ETMarkets Survey: What inflation and growth concerns? Nifty seen past 20k by December!

Notwithstanding the macroeconomic risks and the correction witnessed in the fag end of the September quarter, the outlook for Indian equities remains positive and most money managers see the bulls racing ahead of bears on Dalal Street.

Of the 22 analysts that participated in the ETMarkets Survey, more than 77% of the respondents see the benchmark Nifty 50 above the 20000-mark, and 81% of them expect the Sensex to top 67000 points by the end of December.

In the September quarter, the Nifty 50 has net gained around 2%, after a sharp 10% rally in the June quarter.

Even though inflation risks persist and global economies are facing slowdown challenges, India today is by far the fastest growing economy and in a much better position compared to its peers.

Secondly, foreign fund flows may have slowed down in the September quarter, but domestic institutional and retail inflows remain strong and suggest that the structural bull run in equities remains intact.

While the overall outlook remains bullish, experts see bouts of consolidation in the near term.

"Consolidation is quite likely despite India being in a sweet spot. Due to rising inflation and rising interest rates, globally, the mood may remain cautious. However, Indian corporate earnings growth would limit any major downside for the index,” said Siddharth Bhamre, EVP - research, Religare Broking.

The Positives
While the US Fed has guided for another round of hike in interest rates by the end of 2023, the Reserve Bank of India is widely expected to hold the horses even though inflation risks persist.

Further, investors are betting on the festive season demand, as they expect discretionary spending to pick up.

The other positive is the healthy earnings of companies and the government’s efforts to revive the capex cycle.

These tailwinds have prompted money managers to hold a positive stance on Indian equities.

On Thursday, Nomura Financial Advisory and Securities upgraded India to “overweight” backing the structural growth story.

“The structural story of India is now well known as a major beneficiary of the “China+1” theme, possessing a large, liquid equity market,” it said.

Fund Flows
Strong inflows from foreign institutional investors drove the rally in the June quarter, but a sharp slowdown in the pace of buying by FPIs dampened the momentum in the September quarter.

FPIs net invested just Rs 21,900 crore or $2.6 billion in the secondary market in the current quarter, after pumping in Rs 1.02 lakh crore ($12 billion) in the preceding quarter, data by StockEdge showed.

Even though the pace has slowed down, most market participants expect it to remain positive in the December quarter. Around 48% of the respondents see FPIs being net buyers of equities in the quarter.


However, more than on FPIs, they are confident on domestic institutional inflows, as 68% of the respondents see domestic inflows outpacing foreign fund flows in the December quarter.

“Domestic flows will keep the Indian markets supported and the overall outlook is positive,” said Nitin Agrawal, CEO, Torus Oro PMS.

Valuation Talk
While the overall outlook remains positive, market experts see valuations a little stretched in the midcap and smallcap segments.

Dikshit Mittal of LIC Mutual Fund believes that the valuation arbitrage between largecap and midcap or smallcaps has somewhat been bridged after the recent rally.

“So, any investor coming in at this juncture into the midcap and smallcap funds needs to keep a longer term view, and keep return expectations in check,” he said.

Most money managers therefore see a case for portfolio rebalancing by increasing allocation towards large cap stocks.

(Survey Contributors: Anand Rathi, Nuvama Wealth, Religare Broking, Prabhudas Lilladher, Axis Securities, Geojit Financial Services, Stoxbox, Motilal Oswal Securities, Tailwind

Financial Services, Kotak Securities, Mehta Equities, Choice Broking, Wealthtrust Capital, Wealthmills Securities, Tips2Trade, Growth Investing,Cleamind Consultancy, Abans Holdings, Torus Oro, Equity99, Quantace Research)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)