Markets

Goldman Sachs sets Nifty 50’s 2021 year-end target at 14,100

Our Bureau Chennai | Updated on November 17, 2020 Published on November 12, 2020

Global investment advisory firm Goldman Sachs and Nomura Financial Advisory have turned bullish on Indian markets. While Goldman Sachs has set 2021 year-end target for Nifty 50 at 14,100, Nomura Financial has been a little conservative at 13,640.

According to another global firm CLSA, from a technical perspective, the 12,118-12,470 zone has acted as key resistance in the last 12 months. The recent rally that tested this resistance zone unfortunately occurred with slowing upside momentum. “This non-confirmation leads us to believe that it will be hard to break through 12,470. However, if this level is crossed on a closing basis, the next upside objective is 13,500-13,723.”

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Goldman Sachs has also upgraded India to ‘overweight’ after in April, it downgraded to ‘marketweight’

“We expect 18 per cent total US dollar returns for Asia Pacific regional equities in 2021 as the global economy recovers from the pandemic shock and regional profits rebound from suppressed levels. An upturn in growth and a lag in policy tightening create a sweet spot for equities, especially with light investor positioning,” Goldman Sachs analysts said in the report.

Nomura Financial has raised its 12-month target price for the Nifty 50 as it feels Covid-19 vaccine has improved the prospects of containing the virus spread earlier than expected, and has boosted risk-on sentiment for equities.

Goldman Sachs expects corporate profits to rebound 27 per cent in 2021 and a further 21 per cent in 2022. The foreign brokerage firm further said that macro recovery in India has gathered momentum.

‘Foreign fund flow to rise’

“With increasing risk appetite due to rising certainty of normalcy returning to economic activity, foreign inflows into emerging markets are expected to rise,” Nomura said.

FPIs so far in 2020 have invested ₹73,764.19 crore, or $10 billion.

At the start of 2020-21 (April-March), earnings estimates for the Nifty 50 for the year were downgraded by 27 per cent, but consensus estimates have now been raised by 3.5 per cent. “This suggests that the downward revisions to Nifty 50 earnings estimates have now stabilised, which will comfort investors,” it further said.

Nomura has increased the weight of ICICI Bank and Axis Bank, and has added State Bank of India to its financials portfolio while Goldman Sachs has preferred HDFC Bank, SBI, L&T, RIL, TVS Motor, Avenue Supermart, Fortis Healthcare and Apollo Hospitals.

CLSA: on PE value

The Nifty 50’s 50 per cent rally from the March 2020 lows has pulled it close to its alltime high from January 2020. Global central bank stimulus has made markets treat the pandemic-linked hit as largely a one-off and driven this sharp V-shaped advance, which lifted the Nifty 50 to an alltime 12-month forward-PE high, said CLSA.

“Historically, many significant peaks on the Nifty 50 in the last 15 years have been in the 18.5-19.5x PE range. In addition, empirical evidence of investing above 18x PE has not been encouraging. Unless economic normalisation over the next few months drives a faster-than-expected recovery and surprise EPS upgrades, the 12-month total return on the Nifty 50 may end up being less than 10 per cent from the current levels,” it further cautioned.

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Published on November 12, 2020
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