You are here: Home » Markets » News
Business Standard

Expect no gains for Nifty over next year as stocks get expensive: Citi

The rebound has been helped by foreign investors, who have bought a net $4 billion worth of Indian stocks this year

Topics
stock market | Nifty | Nifty50

Nupur Acharya | Bloomberg 

Traders monitor BSE index at a brokerage firm, as the Sensex goes down, in Mumbai | PTI
Traders monitor BSE index at a brokerage firm, as the Sensex goes down, in Mumbai | PTI

India’s major stocks are unlikely to gain much over the next year as the inflow of funds amid global coronavirus-related stimulus and easy money policies has made them too expensive for now, according to Citigroup Inc.

“Foreign flows are supportive but on the domestic side, we have seen things slowing down a bit,” Surendra Goyal, Citi’s head of India research, said in an interview this week. “Liquidity does act as a support to the market but valuations are on the higher side, particularly in the backdrop of the pandemic.”

The brokerage has a September 2021 target of 11,000 for the NSE 50 Index, about 2% lower than Wednesday’s close. The gauge has surged 48% from its March low in one of the world’s best equity rebounds this year. That’s made shares pricey, with the trading at an all-time high of over 20 times estimated 12-month earnings.

Chart

The rebound has been helped by foreign investors, who have bought a net $4 billion worth of Indian stocks this year despite the nation’s record economic contraction in the latest quarter.

Barring any big negative shocks, Citi expects India’s economy to “normalize” in the January-March quarter as the country gradually emerges from strict lockdown measures. While macro data in August showed signs of stabilization, Goyal cautioned that the outlook is uncertain while local infection rates remain high.

Consumer staples are the broker’s biggest underweight equity position among industries, on high valuations and the impact of reduced consumption. Goyal is positive on banks and other financials, the worst-performing sectors in India this year.

“We are in a situation where there will be an impact on the income and risks of lower spending,” Goyal said. “Low volume growth for consumer goods can persist for a while and hence it isn’t easy to justify the very high valuations that some companies command.”

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, October 01 2020. 10:24 IST
RECOMMENDED FOR YOU
.