The benchmark indices have rallied 36-37 per cent for the year, partly due to recovery in earnings and supportive global cues. The TINA (there is no alternative) factor, thanks to depressing returns in fixed income products, also played its part in pushing equities higher.
But things are changing. Inflation is rising globally and a reversal in easy money policy is on the cards. India is also relatively expensive compared with other emerging markets on a historical basis.
Can domestic stocks climb the wall of worries this time?
Most brokerages, among a dozen that participated in ETMarkets.com poll this year, say yes, while suggesting 12-20 per cent returns for domestic stocks in Samvat 2078. A few are even expecting a downside for the market. But, as said, they are just a few. Overall, the most bullish bet suggests Sensex at 72,000 and Nifty at 21,500. The most bearish bet sees Sensex at 55,500 and Nifty at 16,500.
With record high valuations, says Yesha Shah, Head of Equity Research at Samco Securities, the market, while delivering superior returns as compared with other asset classes, may not run up as swiftly as the past year. With faster economic recovery on the cards, as indicated in the high frequency data and an up-cycle in the corporate earnings trajectory, she says a 12 per cent rise in benchmark indices look fairly achievable. This is despite near-term headwinds such as the rising commodity prices and supply chain bottlenecks.
Binod Modi, Head Strategy at Reliance Securities, has a similar 12-15 per cent target for indices for the next Samvat.
YES Securities is the most bullish of the lot. It has a Nifty50 target of 21,000 and Sensex target of 72,000. Ajit Mishra, V-P of Research at Religare Broking, says Nifty50 will hit 21,500 and Sensex will reach 71,000. Shiv Chanani, Head of Research at Elara Securities, pegs Nifty50 at 21,000 and Sensex at 70,000 by the next Samvat. Jyoti Roy, DVP for Equity Strategist at Angel One, estimates Nifty50 value at 20,000 and Sensex at 67,000 for next Samvat.
The most bearish projection came from Vinod Nair, Head of Research at Geojit Financial Services. Nair sees a base case of 55,000 for Sensex and 16,500 for Nifty50.
A couple of foreign brokerages have cut India’s equity rating in recent days. By some estimates, the Nifty50 is trading at 22.1 times FY23 earnings estimate of Rs 822 and at 19.6 times FY24 our earnings estimate of Rs 926. Some analysts find this too expensive.
Gaurav Garg, Head of Research at CapitaVia Global Research, is bullish on domestic stocks, but he expects returns in the next Samvat to be lower than this year amid expectations of earlier-than-expected Federal Reserve interest rate hikes. This analyst sees Nifty50 at 21,500 and Sensex at 70,000.
Roop Bhootra, CEO, Investment Services, Anand Rathi Shares and Stock Brokers, says the market structure is strong, with strong growth expectations with sustained support from central banks on the monetary policy front so far. He sees Nifty50 target at 19,700. “We do not forecast a Sensex target separately but based on the Nifty50 target, it comes somewhere around 66,100,” he adds.
Vinit Bolinjkar, Head of Research at Ventura Securities, has put Nifty50 at 19,500. Some brokerages such as HDFC Securities and Kotak Securities did not offer any index targets for the next Samvat.
