Domestic brokerages remain bullish on market; retail investors key driver

Even as foreign brokerages have sounded a note of caution on Indian equities, their domestic counterparts see the benchmark indices delivering double-digit returns over the next one year. Half of the participants in the Business Standard poll of domestic brokerages said they expect the Sensex and the Nifty to climb 10 to 15 per cent in the next one year. Another 14 per cent said the gains could be in excess of 15 per cent.

The Sensex on Wednesday closed at 60,008, down 0.5 per cent from its previous close, while the Nifty ended at 17,899. A 15 per cent rally from current levels will take the Sensex close to 70,000, while the Nifty may cross 20,500.

Axis Securities, for instance, has a December 2022 Nifty target of 20,200 by valuing the 50-share index at 22 times its FY24 earnings. Angel One has a Nifty target of 20,000, while IIFL sees it in the range of 20,000 and 21,000 in the next one year, underpinned by economic revival and earnings delivery.

Nearly 80 per cent of the poll participants said the main drivers of the market are now retail investors or mutual funds, and not foreign portfolio investors (FPIs). Since the beginning of October, FPIs have sold shares worth over $2.5 billion. The selling has led to a 3 per cent correction in the market.

A majority of brokerages believed equities would be the best asset class for the next one year. A small portion said the returns on real estate, gold or cryptocurrencies could be more attractive.

While most of the brokerages remained bullish on the secondary market, they remained skeptical about the primary market. About half of them said they see some red flags in the IPO market. A fifth of them said we could be heading towards a bubble territory when it comes to maiden offerings.  Close to 30 per cent didn’t express any such concern.

Interestingly, the Covid-19 scare or surging oil prices are no longer on the minds of market men. Most of them said either earnings disappointment or policy normalisation could spoil the market party.

Sixty-four per cent of the participants said the markets would largely remain steady over the next one year with bouts of correction. None believed that the markets could repeat this year’s performance. The benchmark indices are currently up 30 per cent on a year-to-date basis.

On whether India Inc would manage to meet consensus earnings estimates, the answers were a mixed bag, with 43 per cent saying expectations would be met, while 36 per cent not expecting earnings delivery.

Motilal Oswal Financial estimates Nifty earnings per share to grow at 35 per cent and 20 per cent to Rs 730 and Rs 874 for FY22 and FY23, respectively. Only 14 per cent brokerages said economic growth could disappoint, while the rest said the domestic economy was “well and truly on a revival path”.