Earnings boost: Kotak Securities sees 18% CAGR for Nifty-50 firms in the next 3 years

K.R.Srivats New Delhi | Updated on December 19, 2019 Published on December 19, 2019

Going by projections, Sensex may hit 45,500 by 2020-end

Kotak Securities sees earnings of Nifty-50 companies registering a robust 18 per cent compounded annual growth rate (CAGR) for next three years, a sharp increase over the previous three years CAGR of 8 per cent.

“Incremental earnings growth of Nifty-50 is expected to be skewed and mainly led by the banking sector. We expect Nifty-50 earnings to grow by 10 per cent in 2019-20 and 27 per cent in 2020-21,” Rusmik Oza, Senior Vice-President and Head of Research, Kotak Securities, said.

Oza said this year’s monsoon rainfall has been the highest in the last 25 years paving way for a better rabi output and higher income in the hands of the rural population.

Better farm income coupled with the series of measures taken by the Centre and the RBI in this calendar year could help improve demand conditions in the calendar year 2020. The low-base effect of this year could also help companies report decent revenue and operating profit growth in 2020-21, he said.

In December 2020, Kotak Securities expects one-year forward earnings per share of Nifty-50 to be ₹767 which when valued at 17.5x gives one-year Nifty-50 target of 13,400. The similar target for BSE Sensex would work to 45,500 by December 2020.

4.7% GDP growth likely

Kotak Securities sees India’s GDP growth for entire 2019-20 at 4.7 per cent. In the first half, GDP growth recorded stood at 4.7 per cent. “Even for the next two quarters, we expect the average growth at 4.7 per cent,” Oza said.

He also said that privatisation could be a big theme in the calendar year 2020. Strategic sale of BPCL, Concor and Shipping Corporation can provide the Centre ₹80,000 crore and set the ball rolling for other big ticket divestments, he said.

Commenting on the recent Karvy episode, Ashish Nanda, Executive Vice-President and Business Head of Private Client Group, Commodities and Currency Business, Kotak Securities, said consolidation in the broking industry is likely to be expedited as investor confidence is shaken.

He asserted that Kotak Securities has always ensured that clients’ securities are segregated and kept in their demat account and never pledged to banks/NBFCs.

“Post the Karvy episode, we are now seeing more investors (from other broking houses) coming to our platform. There are some new to market investors as well among them.”

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Published on December 19, 2019
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