Bulls have been operating the show on Dalal Street for months now. The multi-month rally that has noticed Sensex and Nifty scale to fresh all-time highs repeatedly has sown some seeds of be concerned now. Nifty is now at a PE of 40x — which leads quite a few to conclude that markets are stretched now. However, top Dalal Street voices think otherwise post the price range. “Since the quarter of June 2020 was a complete washout in terms of earnings, merely looking at valuations from a Price/Earnings perspective would not be prudent,” Ashish Shanker, Deputy MD, Motilal Oswal Private Wealth Management.
Stay invested
Since March 2020, Nifty 50 has more than doubled in worth, going from 7,511 points in March to 15,133 on Monday morning. Ashish Shanker of Motilal Oswal adds that at this juncture, it is crucial for investors to contemplate interest prices and price of capital, that is at decadal lows. “If investors are at or above their strategic equity allocation levels, they should continue to remain invested, he said.
“The Indian economy may be on the verge of a multi-year investment cycle similar to the 2003-11 cycle given positive drivers in both household and private sector segments. We could also be at the cusp of a big revival in the housing cycle,” Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities told TheSpuzz Online. Nifty presently trades at 23x forward PE various though it traded at 6-8x prior to the start off of 2003-08 bull industry which was led by robust GDP and earnings development. “One can remain invested for the time being by keeping a watch on global interest rates and bond yields as they are the biggest risk factor for global markets this year,” he added.
More target upgrades ahead?
Kotak Securities has enhanced its year-finish 2021 target cost for Sensex and Nifty soon after the Union Budget, and that may possibly not be the finish of its upward revision. “Post budget, looking at Q3FY21 numbers that were coming and the very low base of first half of FY20 we felt there could be more earnings upgrades possible in the next few months,” Rusmik Oza stated. The revised target for Nifty is based on CY21 finish Nifty-50 EPS estimates of Rs 770 and a slightly greater various of 19.5x.
What’s fueling the development
The banking space, typically noticed as a proxy for financial development, has noticed a clean up in the course of the pandemic. “The Financial system has done a lot of clean-up of its books, and most of the top Banks are entering the current cycle with extremely high provision coverage ratios,” Shanker stated. “Key reforms such as Corporate tax cuts, and the Government’s thrust to augmenting manufacturing through PLI in select sectors are likely to aid in earnings growth going forward. Hence, when adjusted for revised earnings growth estimates for FY21, the equity markets look to be in fair value zone,” he added.
Sectoral watch
Among sectors that Rusmik Oza is watching involve banks, capital goods, building, engineering, oil & gas, cement, genuine estate, and metals. He adds that these sectors can make dollars for the previous underperformance and prospective recovery. Shanker is also keenly watching the financials and cement, along with auto, buyers, pharma, IT and infrastructure.
(The suggestions in this story are by the respective analysts, study and brokerage firms. TheSpuzz Online does not bear any duty for their investment assistance. Please seek advice from your investment advisor prior to investing.)