The Omicron variant has fallen sharply, while commodity prices and bond yields have begun to stabilize. Disputes between Russia and Ukraine are likely to escalate from global nuclear weapons to local conflicts, experts say. A dip in the latest inflation data for the United States, a general cooling of commodity prices and the expected increase in OPEC + oil production will also support the market now.
In addition, the RBI’s likely monetary stance and fiscal measures taken by the government will further reduce inflation.
“Q1FY23 is the first quarter in which there has been no Covid restriction on movements since the pandemic began in 2019. The quarterly highs so far indicate a strong economic recovery, which should gain momentum in the future,” said Vinod Karki.
He said that the improving macroeconomic indicators are reflected in the declining fears index (VIX) and will probably put a floor on stock prices on a one-year forward P / E basis, which fell from 23x in October 2021 to less than 18x at the May 2022 sale.
“Taking into account the above factors and developments, our target for Nifty 50 in March 2023 is 19,000 (possibly up to 15 percent from current levels). We are overweight in equities that are driven by investment ratios, savings ratios, lending rates, exports and closed consumption, “said Karki.
Total equity sales in May amounted to 39,993 million rupees, according to information available on NSDL. This brought the total sales of the FPI in 2022 to 31 May to 1.69,443 million rupees. These high sales were the main factor in the weakness of the Indian market, even though much of it was balanced by a large domestic flow.
Recently, the recovery of macroeconomic indicators has also led to a decrease in outflows abroad in recent days. In early June, sales have been in very small quantities, which is a break from previous weeks.
“If the dollar and the US bond balance, it is likely that FPI sales will stop and may even decline. On the contrary, if US inflation continues to rise and dollar and bond yields continue to rise, FPIs could resume sales. Inflation data in the United States is the key, “said VK Vijayakumar, Chief Investment Officer at
Experts have also been supported by the improving outlook for agriculture and the manufacturing sector. Karki pointed out that PMI data for production have shown expansion. Export growth, employment and tax collection have also improved. Profits in the fourth quarter of 22 were also strong – despite a challenging environment – as the total share of companies in “profit from GDP” reached 4.5 percentage points on FY22. Added to that is the forecast for a normal monsoon, then the economy looks bright.
He said that the correction of the market and the expansion of profits have led to a drop in valuations
reasonable levels. Manufacturing products as well as financial companies, which make up 72 per cent of the total profit pot, are reasonably valued at 15x-20x after 15x-20x based on historical limits, while the other 28 per cent of the profit pot (services, consumption and health services) are still at a high P / E ratio. after 33x.
Although the forward P / E for the Nifty50 index around 18x is at its lowest level since CY16 (excluding the short Covid period), while the P / B at 3x is at its long-term average and the “market value relative to GDP” is slightly above the 100 percent mark .
In such an environment, among the top picks for ICICI securities are: SBI, Axis Bank, HDFC Bank,
SBI Life, Larsen & Toubro, NTPC, NHPC, GAIL, Oil India, Coal India,,,,,,,,,,, Metro Brands,,, TVS Motors and.
(Disclaimer: Advice, suggestions, opinions and opinions given by experts are their own. This does not represent the views of the Economic Times)
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