Kotak Secs sees markets gaining 12.5% in '20; Sensex above 45K

Domestic brokerage Kotak Securities expects the benchmarks rallying 12.50 percent in 2020, led mainly by banking stocks but advised investors to stay away from the poorly-governed firms. The brokerage expects the Sensex to scale the 45,500- mount by December 2020 (which closed at 40,445 on Friday).

"The mood is more positive than what is reflected in the real economy. This is mainly because of improvement in earnings led by a reduction in corporate tax rate and strong foreign portfolio investments and inflows into systematic investment plans," the brokerage said on Friday. While the rally will be led by banking stocks, larger non-banking lenders backed by strong parents, and companies in the oil & gas, capital goods, construction, healthcare and agrochemicals will also deliver good earnings for investors next year and thus boost the indices.

"It is best to avoid poorly-governed companies with weak balance-sheets and poor return ratios as they may not find favour with fund managers and long- term investors," it advises and said this is the biggest lesson of 2019. While noting that it is the rally in a handful of constituents that helped the Nifty deliver double-digits returns in 2019, it pointed out that mid- and small-cap indices are in the red for the year.

It feels privatisation can be a big theme next year from which the government can mop up around Rs 80,000 crore, which can go up to Rs 5 lakh crore if brought down the stakes in all listed entities, excluding banks, to 51 percent. Describing the Karvy Broking incident as unfortunate, it predicted that investors will move to well-governed brokerages..