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Kotak Securities expects net profits of the Nifty- 50 Index to grow 34.5 per cent in FY22, 16 per cent in FY23 and 13.3 per cent in FY24. In its market outlook for 2022, it has pegged the Nifty/Sensex target at Best Case is 21,109/69,600 (22x FY24); Base Case is 19,190/63,800 (20x FY24) and worst case is 17271/59,500 (18x FY24).
Bullish indicators
Jaideep Hansraj, MD & CEO- Kotak Securities, said the reading of high-frequency indicators including GST collection, e-way billing, IIP, freight and consumption across sectors for recent months are also encouraging which bodes well for the markets.
Currently Nifty 50 is trading at a valuation of 24.8x FY22, 21.4 FY23 and 18.6 FY24 earnings. “Though valuations look rich in isolation, the strong earnings growth in many stocks and sectors provide investment opportunity. Also the recent market correction provides investment opportunities in quality large-cap and mid- cap stocks,” he said.
Kotak Securities expects Nifty EPS of ₹722 in FY22, ₹840 in FY23 and ₹959.5 for FY24.
‘GDP to be impressive’
Kotak Securities expects India’s GDP growth to be impressive even in FY23 at 8.1 per cent followed by a more normal print of 6.5 per cent in FY24 after 9.5 per cent in FY22.
GDP growth would be primarily investment-driven given that the external sector may not be supportive for long, and consumption prospects may not be bright given sustained and unequal Covid impact on household income, according to Hansraj.
Key risks
Hansraj highlighted that there are two major risks that will continue to weigh on global and domestic economic growth in FY23: Firstly, Covid waves as is being seen in various economies and further mutations to the virus and secondly supply-chain issues believed to be continuing for another 6-9 months weighing on global trade and growth.
“With expectation of impressive GDP growth, we expect RBI to tighten its policy framework as follows: normalising the policy corridor (from February 2022); sterilising incremental durable liquidity surplus; changing monetary policy stance to neutral; and 50 bps repo rate hike (from late-H1 FY23). We expect 10- year yield around 6.5 per cent by end FY23E”, he said.
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