Metal, Energy, IT stocks help markets gain over 18% in FY22; Emkay sees Nifty50 around 19,000 by FY23 end

The market is all set to close the financial year 2022 with over 18% gains. The good performance of the domestic equity markets despite volatility was largely supported by metals, energy and IT services. As on March 31, hours before market closing, Nifty Metal, Energy and IT indices gained nearly 62%, 42% and 41% respectively.  

Bank Nifty was an underperformer with around 9% gains. " Delay in credit growth revival and rate-hike concerns affected the performance of Banking and Financial stock," said a note from Emkay Global Financial Services.  

Source:  Emkay Global Financial Services

Sectoral performance 

Sectorally, Nifty FMCG, Nifty Auto and Nifty Pharma indices also underperformed Nifty-50. Nifty Infra index marginally out-performed the Nifty-50 benchmark due to government’s capex thrust and hopes of private capex revival.  

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Nifty mid-cap and Nifty small-cap indices significantly out-performed Nifty-50 in H1. However, the margin of outperformance has eroded in H2, because of Russia-Ukraine tensions, spike in crude & commodity prices, heightened inflation and expected rate hikes by US Fed. 

As per Emkay, Russia-Ukraine crisis resulted in negative implications for India’s macro situation. 

Russia-Ukraine conflict caused waves in crude and commodities as geo-political tensions likely to have negative implications for India’s macro situation in terms of higher inflation and bond yields, higher CAD and weaker INR, and potentially weaker consumer demand, and thus a lower GDP growth rate. 

Market outlook FY 23 

Stating crude and commodity prices, policy tightening are major challenges for the market in the next 12 months, the brokerage sees returns of about 10% in the Nifty50 from current levels.  

"LIC IPO may impact liquidity in the short term. We see nifty-50 fair value of around 19,000 by end FY23. Expect Nifty/Sensex making new highs towards end of FY23 and earnings growth of 20%," said Emkay.  

Nifty profit increase in FY22 was largely driven by Oil & Gas and Metals sectors  

Two-third of the Nifty PAT increase in FY22E likely to come from six stocks—Tata Steel, JSW Steel, RIL, ONGC, SBI and Airtel, it said.  

Similar pattern expected for FY23—six stocks may account for 2/3rd of our estimated PAT increase for Nifty. 

Saurabh Mukherjea, founder of Marcellus Investment Managers, is of the view that the odds are pretty high that the next financial year will be a good year for the market given that the economic recovery is proceeding nicely. 

"Almost always, when you have economic recovery and rising interest rates, you tend to get very healthy stock market performance. I think that`s the sort of 12 months we`re heading for," Mukherjea said.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)