While most brokerages foresee strong volatility in equities and unfavourable risk-reward in 2019, many are projecting 10-15 returns, which would far exceed Sensex’s 6 per cent expansion in 2018. But there is a caveat: 2019 elections should not throw up a ragtag coalition into power. Kotak Institutional Equities says next year may be a happy one for equities and expects around 10-15 per cent return from Indian market on back of strong earnings growth and broadly stable macros.

The brokerage expects 27 per cent profit growth for Nifty50 companies during FY2020. “After a volatile 2018, equities could be poised for better returns in 2019 with caveat that Indian electorate does not deliver a shock verdict in 2019 elections by electing a fragmented coalition government,” Morgan Stanley said in a report.

It sees Sensex at 42,000 by end of 2019. Besides India’s election outcome, brokerages have listed a possible global slowdown, China-US trade tension and any surprise spike in crude oil price as key risks for Indian market.

The 30-share BSE Sensex rose 6 per cent to 36,068 in 2018, while 50-share Nifty gained 3 per cent to 10,863.

HDFC Securities sees Nifty at 12,400 by end of next calendar, while Narnolia Financial Advisors projects Nifty at 11,800. Optically, rally in select stocks kept Sensex and Nifty in green whereas smallcaps and midcaps took a heavy beating.

As many as 21 stocks from Nifty pack gained up to 50 per cent, with Bajaj Finance being top grosser, while TCS, HUL, Infosys and Kotak Mahindra Bank climbed between 25 per cent and 45 per cent during year.

On other hand, Tata Motors, YES Bank, Bharti Airtel, Vedanta, and Sun Pharma slipped between 25 per cent and 60 per cent.

The BSE Smallcap and Midcap indices cracked 24 per cent and 13 per cent, respectively. Introduction of LTCG tax, reclassification of mutual funds, Nirav Modi scam, volatility in crude price and rupee, outflows by foreign institutional investors, state elections, Trump tantrums, NBFC liquidity crisis and global trade tensions kept domestic market sentiment cautious through year. JM Financial is betting on largecaps for 2019.

“Valuations of midcaps and smallcaps have f allen to levels lower than their long-term averages, and they are trading at a discount to their largecap peers.

However, earnings expectations remain elevated for midcap and smallcap indices and, hence, we continue to prefer largecaps,” it said.

Information technology remains investors’ favourite among sectoral indices on BSE.

The BSE IT index gained 25 per cent to 14052 on December 31 from 11,278 on December 29, 2017.

FMCG and Banking indices advanced 10 per cent and 4 per cent, respectively, in 2018.

“We are bullish on prospects of banking sector as we believe that bad news has peaked.

Our top pick from this sector is ICICI Bank,” said Vivek Ranjan Misra, Head of Fundamental Research at Karvy Stock Broking. The BSE Realty, Auto, Metal, Power, Oil Gas and Consumer Durables indices sank between 9 per cent and 31 per cent. Sharekhan is overweight on private sector lenders, including corporate banks, apart from consumer discretionary (focussed on rural demand-driven consumer companies), agri-inputs, specialty chemicals, and selectively on industrials and IT services.

It is underweight on PSU banks, pharma and metals. Kotak Institutional Equities favours a mix of ‘quality’ stocks in financials and IT services and ‘value’ stocks in other sectors. Axis Securities has recommended IndusInd Bank, Voltas, Sterlite Technologies, Aarti Industries, Take Solutions, Marico and Amber Enterprises and sees 12-38 per cent upside potential in them. ICICI Bank, IndusInd Bank, Reliance Industries, Larsen Toubro, Britannia, Aarti Industries, LT Infotech, RBL Bank, Jubilant Food and TCI Express are among Sharekhan’s top picks for 2019. Look, what 2019 might hold for you!