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BofA slashes Nifty target to 16k by Dec on inflation, rate hikes concerns

After scaling many new highs, Dalal Street ended the fiscal 2022 with a healthy 18 per cent gains, and ended calendar 2021 with a healthier 24 per cent gains.

BofA | Nifty

Press Trust of India  |  Mumbai 

nse, National Stock Exchange
National Stock Exchange

Citing the faster-than-expected interest rate hikes by the Reserve Bank and the mounting worries, Wall Street brokerage Bank of America Securities has slashed its base case returns target and forecast the index to close the year at 16,000, down from 17,000 projected earlier.

In the negative case scenario, the brokerage warned of a massive 15 per cent correction and the index closing at 13,700 by December.

After scaling many new highs, Dalal Street ended the fiscal 2022 with a healthy 18 per cent gains, and ended calendar 2021 with a healthier 24 per cent gains.

After an eventful 2020, the benchmarks showed strong resistance in 2021 as the economy showed signs of recovery and the Sensex gained 21.99 per cent while the rose 24.11 per cent.

In FY 22, the Sensex returned 18.29 per cent and the 18.88 per cent.

In a report on Tuesday, (Bank of America) Securities said it sees flattish market returns from current levels as it cut its base case Nifty target to 16,000 by December from 17,000 points forecast earlier in the year.

The revised projection is based on faster-than-earlier-tightening by the Reserve Bank (by 40 basis points earlier this month in an off-cycle hike) as well as central banks of other key countries.

The report specifically listed the front-loading of the rate hikes by the US Federal Reserve at 50 basis point in May and similar hikes in June and July; rising in the domestic market -- CPI (Consumer Price Index) has printed in at an eight-year high of 7.8 per cent-- and the brokerage sees it averaging at 6.8 per cent for FY23 vs RBI's 5.7 per cent projection.

The report cited easing of currently volatile crude prices, turnaround in FII (Foreign Institutional Investors) flows and bottoming of the rupee as upside risks to this view, but underlined that global prints coming ahead of estimates (the US inflation is at 40-year high and so is Britain's), resulting in the faster-than-anticipated rate hikes, is the key downside risks.

In this negative scenario, the brokerage sees Nifty's valuation shrinking to its long term average of 15.8 times, resulting in the index plunging to 13,700 level.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Tue, May 17 2022. 20:11 IST