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Brokerages expect sectors such as cement, construction, real estate, infrastructure, financials and select auto companies to do well in the coming Hindu New Year. However, most analysts anticipate the liquidity-driven momentum to end in Samvat 2078.
According to brokerages, most global central bankers, including the US Federal Reserve, are considering easing soft monetary policy and tapering the monthly asset purchase programme ($120 billion in the US) in the coming months; a liquidity-driven market globally is likely to take a backseat in CY22.
Brokerage views
Motilal Oswal, MD & CEO of Motilal Oswal Financial Services, said, “With the economic cycle picking up, we expect corporate earnings growth to revive as well. Markets have always moved in tandem with earnings growth. Although there would be ups and downs in between, we expect the overall trend of the market to remain positive in Samvat 2078 as well.”
Kotak Securities said, “We expect a strong economic and earnings revival and a stable Covid-19 situation to provide short-term support to the market. We do not see any change to India’s medium-term narratives including favorable demographics and likely multi-year investment cycle led by corporate and household capital expenditure.”
Axis Securities expects Samvat 2078 to be a year of balance-sheet leverage, led by significant improvement in corporate profitability. Cumulative and rolling net profit of NSE 500 universe for the last 4 quarters has touched an all-time high with loss-making sectors turning positive and significantly contributing to the net profitability. Moreover, RoE for the broader market is improving after a muted performance for several years, it said and added that overall, the Indian market has entered into an earnings up-cycle with an expectation of more than 20 per cent growth in Nifty’s earnings in the next two years.
With faster economic recovery on the cards, Samco Securities said more cyclical sectors are likely to join the rally with the expectation of higher government spending moving forward. Markets have seen an ever-increasing base of investors and shows resilience despite macro and short term challenges and we believe that it will continue to offer plentiful investment opportunities.
Reliance Securities said that the spread between Nifty earnings yield and the G-Sec yield has reached almost close to the historical average of 190 bps, which still offers comfort considering the RBI’s sustained accommodative approach to support the economic momentum. “However, sustainability of earnings recovery will be a key tailwind for the market for Samvat 2078. We expect the Nifty 500 earnings-to-GDP ratio to improve from a low of 2.5 per cent in FY20, to 3.4 per cent in FY23 (the highest after FY15). Further, Nifty can potentially deliver a 12-15 per cent returns over Samvat 2078.”
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