On a year-to-date (YTD) basis, defensive stocks have been the winners: Pharma stocks surged 45 per cent and IT shares rose 33 per cent.
Indian share markets are logging fresh record highs as financial activities resume to pre-COVID-19 levels. The GST collection also enhanced for the second consecutive month in November, which is yet another sign of recovery in the economy. Research and brokerage firm Axis Securities expects NSE Nifty 50 to hit 14,600 points by December 2021. The brokerage firm added that the earnings situation has also enhanced with the majority of quarterly earnings of the existing fiscal beating expectations. “34 out of 50 Nifty companies have beaten the Street estimates at EPS level,” it stated.
Axis Securities has upgraded its FY21 EPS by 6 per cent and FY22 EPS by 8 per cent. “We value Nifty at 20x at FY23 earnings translating to our December 2021 target for Nifty at 14,600,” the brokerage firm stated. On a year-to-date (YTD) basis, defensive stocks have been the winners: Pharma stocks surged 45 per cent and IT shares rose 33 per cent. On the other hand, NBFCs had been down by 5 per cent, Banks by 1 per cent, Industrials and Metals by 3 per cent on YTD basis.
The brokerage firm noted that in the final couple of months, the whole marketplace narrative was positioned towards defensive plays with IT and pharma stocks outperforming the marketplace. However, recovery was observed in BFSI, Auto, Metals, Cyclicals (Ex Reliance), which also began outperforming in the month of November. The BFSI sector was on backseat till October and outperformed the broader marketplace with enhanced fundamentals in the month of November.
Mid-, smallcaps choosing up steam
Axis Securities in its report highlighted that from a valuation point of view, midcaps appear appealing as compared to massive caps. During the bull phase of 2017, midcaps had been observed trading with 45 per cent premium to massive caps. Analysts at the brokerage firms think that the current spate of IPOs and their results indicates that the appetite for mid and smallcap stocks. “Our case for two year rolling returns indicates that the market has turned in favour of small and midcap stocks which are more reasonably valued and offer greater upside potential,” it added.
The brokerage firm also stated that the new suggestions by capital marketplace regulator Securities and Exchange Board of India (SEBI) on multicap funds has tilted the favour in case of mid and modest cap stocks which will hold the space in vogue more than the medium term. Axis Securities highlighted that in the month of November, smallcaps and midcaps are choosing up steam and they ought to provide strong returns in 2021 as financial uncertainties will lower and volatility will decline. “We believe volatility will decline significantly in 2021 which will lead to a small and mid cap rally,” it added.