Legendary American investor Warren Buffett once famously said it is wise to be “fearful when others are greedy and greedy when others are fearful.”
Applied, from the benefit of hindsight, to the current Indian market situation, it could be considered an apt piece of soliloquy.
Chances are that anyone following Buffett’s investment philosophy might have created wealth in FY21 by staying invested in the mayhem or by entering markets in March last year when both the Sensex and the Nifty suffered double-digit fall on a monthly basis amid the outbreak of COVID.
The same exact emotion – the raw emotion of fear – gripped D-Street back in March 2020 when COVID cases started to increase and the government imposed the first lockdown.
Investors who managed to conquer their fright and remain invested or added fresh money instead, must be smiling at the sight of Multibagger returns in certain stocks. The Nifty50 almost doubled from the March closing low of 7,610 recorded on March 23.
The Nifty50 rallied by over 70 percent so far in FY21 from March 31, but experts feel that the golden run, which benchmark indices saw in the last 12 months, is unlikely to continue and investors should pare their expectations.
Brushing aside the worries, the Indian market recouped COVID-19 losses and climbed fresh record highs in FY21. The momentum could well continue till 17,000 (best case scenario) on the Nifty, which translates into an upside of about 15 percent from March 22 close of 14,736.
If there are no further lockdowns, the US Fed stays accommodative, money from foreign investors continues to pour into Indian markets, stability in corporate earnings, and with strong economic data in tow – fresh highs are possible amid some consolidation, suggest experts.
“I am positive on the medium to long term outlook of the Indian equity market. This, by no means, implies that the market movement will be unidirectional. In the short term, the volatility is expected to continue,” Pradeep Gupta, Co-Founder & Vice Chairman, Anand Rathi Group told Moneycontrol.
“I would not be surprised if Nifty 50 moves towards 17,500 during the next financial year in the absence of any major new negative development. It is, however, important to point out that by nature, the equity market is volatile and 5-10 percent market corrections are common even during a structural bull run,” he added.
Shrikant Chouhan, EVP, Equity Technical Research at Kotak Securities told Moneycontrol: “In the year, 16,500 and 13,500 should be the range for the market. In case we see the market crossing 16,600 with improved fundamentals or with some big developments, then we may even see the levels of 18,500. However, we are targeting 16,500 for the time being.”
According to him, “cyclicals should do well along with commodities, infra, capital goods, and commercial vehicles. It should be due to sustained rise in the long term bond yields.”
The big factor likely to pull markets forward in FY22 is earnings growth. With the economy showing signs of normalization, all eyes are on India Inc. to deliver a strong performance in the forthcoming quarters.
Market analysts expect a healthy earnings upgrade going forward due to the rebound in economic indicators. The consensus expectations on earnings growth of Nifty 50 suggest compounded annual growth rate (CAGR) of over 20 percent in the next two years.
“We continue to remain positive on equity markets given the estimates of strong growth of over 25 percent CAGR in Nifty earnings for the next two years, easing liquidity conditions and policy measures to support economic revival,” Gaurav Dua, SVP, Head – Capital Market Strategy, Sharekhan by BNP Paribas, told Moneycontrol.
“However, the upside in the benchmark indices could be limited to 12-14 percent in the next fiscal,” he said, hoping to “see scope for better returns in the broader markets.”
Foreign institutional investors (FIIs), net buyers of over Rs 2.67 lakh crore this fiscal, have played an important role in lifting prices in FY21 and experts feel that the trend is likely to continue in FY22 as well.
Anuj Jain, Co-founder & Senior Research head at Green Portfolio told Moneycontrol: “With the ramp-up of vaccination drive, foreign portfolio investment (FPI) and foreign direct investment (FDI) liquidity continuing to flow in, strong conviction on India from global fund houses, positive momentum from domestic retail investors, good earnings momentum showed by companies, and success of production linked incentives (PLI), we expect Nifty to reach 16,000 by the end of FY 22.” All in all, the suggestion of good tidings to come.
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