The Indian market has been one of the best-performing markets in this calendar year and is up 25 per cent on a YTD basis, The rally is not over yet and dips should be used as a buying opportunity, ICICIdirect highlights in a report.

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The brokerage firm sees the Nifty50 heading towards 20,000 while the S&P BSE Sensex could well hit 66,600 which translates into an upside of about 12 percent from Monday’s closing of 59,299 in FY22.

They have climbed the wall of worry be it be the second Covid in the country in April-May 2021 or the third wave expectations during August-September 2021.

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This was due to a confluence of 3 fundamental factors.

First and foremost, equity as an asset class is being widely and rightly recognised as an asset generating inflation-beating returns or real returns over a long period of time and is indeed very much liquid in nature; the TINA (there is no alternative) factor is at play.

Secondly, with the increase in the pace of digitisation, a set of efficiencies have crept into organisations as well as the economy, indicating better corporate earnings/GDP growth.

Thirdly, with new-age technology platforms, the reach of equities has increased with a record number of demat accounts being opened over the last 18 months, indicating enhanced retail participation.

Apart from these fundamental drivers, ICICIdirect list below some pointers, which makes us incrementally positive on the markets:

Higher pace of vaccination: 

As of date, domestically India has administered 89 crore vaccine doses (69% of the eligible population vaccinated with the first dose, 25% of the eligible population fully vaccinated) and is on track to administer 200 crore doses by 2021 end.

With a large part of the population slated to be vaccinated by Dec’21, expectations are rife for sooner than expected economic recovery

Pro-growth policy action by the government:

Pro-growth policy action by the government like expedite work on Delhi-Mumbai expressway, PLI scheme for new technologies in the auto space; interim cash flow relief measures in the telecom space.

National Asset Monetisation Pipeline:

National Asset Monetisation Pipeline (| 6 lakh crore in FY22-25), as well as robust tax collection in H1FY22 (up to September 22, 2021), give much-needed financial muscle to the government to expedite spend on CAPEX and infrastructure that has a ripple effect on the economy.

Real Estate:

Real estate space pullback with record registrations in some cities like Mumbai for September 2021 with residential housing prices starting to move northwards in some states.

Maturity of Indian capital markets with start-up unicorns getting listed, thereby expanding market valuations at the blended level.

Corporate earnings:

Corporate earnings have been nearly stagnant in the recent past with FY19-21 Nifty earnings CAGR at 5%. Currently, we are on the cusp of a high double-digit growth trajectory with earnings CAGR over FY21-23E at 26%, the key driver for markets to inch higher.

Conclusion:

Keeping earnings estimates unchanged (expecting an upgrade post Q2FY22) and tweaking the P/E multiple, we assign a fair value of 20,000 to Nifty, valuing it at 24.5x P/E on FY23E vs. 22x earlier. Sensex is seen at ~66,600

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)