Nifty to be around 19,100 by December 2022: BofA Securities

Bank of America Securities believes that the Indian economy is best placed among the emerging markets pack to command a premium valuation and expects the benchmark Nifty to be around 19,100 by the end of the current calendar year.

The global financial major, however, also believes that short-term events could lead to intermittent market corrections throughout the year and there are potential headwinds in store including Omicron or further Covid-19 waves, peaking liquidity/stimulus, high inflation/rising rates, stronger dollar, higher crude & result of state elections.

While making a presentation to release the 2022 India Outlook, BofA Securities Head- India Strategist Amish Shah highlighted the fact that there are structural long-term themes as well, including, rising share of private sector as government opens monopolies in sectors like gas grids, defence, airports, coal mining and railways among others to attract private & foreign capital.

He further stressed on the fact that between FY11-15 and FY15-1HFY20, the share of sovereign funds, pension funds and PE deals in the infra space rose by 70 per cent while adding that Real Estate Investment Trusts or REITs could be the preferred investment vehicles.

Incidentally, the share of REITs within the infra space in India is only 26 per cent, which is much lower than that of countries like Singapore and US where such share is pegged at 57 per cent and 71 per cent, respectively. In Australia, this share is pegged at 92 per cent.

Some of the other long-term themes that would work in India's favour, as per Shah, is the focus on getting de-carbonised, the potential for increasing the share of formal economy, reforms momentum and India's chance to become a credible global supply chain alternative, among others.

According to Shah, India is expected to see a multi-year capex cycle and corporate earnings is expected to outpace GDP growth. Incidentally, he expects GDP growth to be strongest in India among the emerging markets pack.

"We expect India's GDP growth at 8.1/ 9.5 per cent in 2021/ 2022E," stated the BofA Securities report. "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," it further added.

In terms of sectors, the global financial major is overweight on financials, industrials, autos, IT and utilities while being underweight on materials, discretionary, staples, healthcare and energy.

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