In Samvat 2075, how much will Nifty gain? Index may soar 14-21% by next Diwali

Investors are looking at 2075 with hope and trepidation in equal measure. While the outcome of state elections and ultimately the Lok Sabha 2019 polls are anxiety points, domestic economic growth and corporate earnings are showing green shoots after a long time.

Most of the top experts at brokerages project the benchmark Nifty to gain 14-21% and hit 12000-12800 by next Diwali, while just one struck a cautious note with a target of 10250 (a 2% drop from the current level), indicates a DNA Money survey.

From a portfolio perspective, investors should consider a balanced approach with about half money in stocks while the rest should be judiciously distributed across debt and gold while cash may act as a tactical instrument, experts suggested.

In terms of Nifty target, any level above 11700 will mark a new high. V K Sharma, head - PCG and capital markets group, HDFC Securities, is the most bullish with a 12800 target as he feels all the negatives are priced in. He expects Nifty earnings to grow by 20% next fiscal.

Pankaj Pandey, head of research ICICIdirect, agrees that the worst may be behind in the banking space.

“We value Nifty/Sensex at 18.5 times FY20E earnings, resulting in one year forward target of 12300 (Nifty)/39500 (Sensex),” he said.

A lot depends on how the markets react to elections. Amnish Aggarwal, head of research at Prabhudas Lilladher said Nifty is likely to be around 12600, much above earlier high of 11700, if the economy does not deteriorate further and India gets a stable government after 2019 elections.

“Banking system has seen a significant cleanup and earnings trajectory has been moving up. Earnings will be a positive trigger for the market. The challenges for the market will emanate from the political front.

Elections will cause volatility and market multiples could shrink,” points out Naveen Kulkarni, head of research, Reliance Securities.

The lone bear in all this Vinod Nair, head of research, Geojit Financial Services. His Nifty target of 10250 indicates that at best market will be flat with a downward bias.

“Currently, we have one year forward base-target of 10250 for Nifty50, which is reduced from 10400 in Q1FY19. This is based on 12.5% earnings growth in FY19 and 15% earnings growth in FY20, which is lower than the market forecast of 15% and 22%, respectively. In the last two quarters, the market has reduced the earnings growth for FY19 from 20% to 15%, while we have reduced from 15% to 12.5%. 

Our reduction is based on H1FY19 numbers which are likely to be in a range of 5% to 10% as per the actual result of Q1FY19 and on-going Q2FY19.”

Arun Thukral, MD and CEO, Axis Securities, feels that liquidity evaporation in global markets to the ensuing quantitative tightening, disruption due to a disorderly exit of Britain from EU and fractured mandate in general elections 2019 are the three major risks for the Indian Equity markets over next one year.

DNA Money first published this article on 8th November, 2018.