Nifty to hover around 19,100 by December 2022, says Bank of America

The benchmark Nifty will hover around 19,100 points by the end of the current calendar year, Bank of America (BofA) Securities said in its India Year Ahead 2022 report.
 
However, there could be corrections throughout the year as there are headwinds like peaking liquidity, high inflation, rising interest rates, strong dollar, and results of state elections, the firm said.
 
Amish Shah, head of India research, BofA Securities, said India is set to see the rising share of the private sector as large government monopolies are being opened up to attract private and foreign capital.
 

Shah said real estate investment trusts (REITs) could be the preferred investment vehicles. The share of REITs within the infra space in India is 26 per cent at the moment, much lower than in countries like Singapore and the US, where similar investment instruments account for 57 per cent and 71 per cent, respectively.

 
Shah further said that India’s efforts in de-carbonise, rise in the share of the formal economy, and the possibility of India emerging as a credible global supply chain alternative are tailwinds.
 
India is expected to incur a capital expenditure of $395 billion towards de-carbonisation from 2020-2030. The report said the share of unorganised players is high across sectors and provides scope for consolidation.
 
The report said manufacturing as a percentage of gross domestic product (GDP) is stuck at 17-18 per cent. And foreign direct investment (FDI) flows within manufacturing have been modest. However, the production-linked incentive schemes for 13 sectors have a high scope of success.

 
The report further said India is expected to see a multi-year capex cycle. The infrastructure sector has been capital starved for the past nine years, and the government is cutting subsidies to create room to finance this.
 
Regarding emerging markets, the report said India is best-placed vis-à-vis its EM peers to command a premium valuation.
 
“Also, Indian firms enjoy superior RoEs vs regional peers, likely aided by higher margins on brand power & market concentration- lacking in most of the other regional countries,” the report noted. And India’s forward premium against its peers is justified.
 
BofA said when it comes to sectors, it is ‘overweight’ on financials, industrials, autos, IT and utilities. It is ‘underweight’ on materials, discretionary, staples, healthcare and energy.