Sensex at new high, Nifty may reach above 18700 in 12 months; Volatility offers attractive opportunities

NSE nifty 50 And BSE Sensex Analysts at ICICI Direct expect it to hit an all-time high in the next one year on the back of good earnings growth. The brokerage firm has shifted its 12-month rolling target for Nifty 50 to 18,700, which will not only be a new all-time high but will also translate to a 13% upward move for the benchmark index from Wednesday’s closing price. This target for Sensex is 62,300. However, the target is a downward revision by ICICI Direct. Corporate earnings, a true barometer of economic health, have been fairly resilient, said the report, authored by Pankaj Pandey, head of research, ICICI Direct. Nifty hit an all-time high of 18,604 in October and Sensex hit 62,245 in the same month.

The domestic stock markets have witnessed sharp declines in the past few months along with global equity indices. The decline is due to various factors such as geopolitical conflict, rising prices of key commodities and consequent rise in interest rates. Although the earnings have been good. “Interestingly, contrary to common sense, corporate earnings have not been disappointing in Q4FY22, there has been no change in our total income,” Pankaj Pandey said.

The brokerage firm noted that management comments across businesses were positive on the demand outlook amid pick-up in economic activity, aggressive infrastructure spending outlay by the central government and a revival in the private capex cycle, but were wary as a result of further input cost inflation. Broader price growth and a slightly softer margin trajectory.

The headwinds have gone completely unnoticed and ICICI Direct has trimmed its valuation multiples amid higher-than-expected interest rate hikes. “As a result, our index target has come down,” Pandey said. He added, “We still remain constructive on the markets and believe this is the right time to build a portfolio of quality companies, that are capital-efficient in nature, have lean b/s and a longevity of growth. “

ICICI Direct projects that Nifty earnings may exceed 20% CAGR in the three-year horizon (FY21-24E), while in FY22-24E, on a higher basis, earnings CAGR is closer to 14%. “Rolling our valuations to FY24E and trimming our forward PE valuation multiple amidst rising rate hike scenario, we now value Nifty at Rs 18,700 i.e. 20x PE at FY24E EPS at Rs 935,” said the brokerage firm. The firm said. This target for BSE Sensex is 62,300. “As a structural bet, we prefer the capex-linked capital goods, commercial vehicle space and PLI-oriented domestic manufacturing game,” the note said.