As India is one of its top underweight markets in the developing market area in 2023, the Nifty objective for December 2023 is 18,000 points, a full 4 percentage points lower than present levels.
A foreign firm anticipates a 4% drop in the Nifty objective of 18,000 points for the next year, citing rapidly declining consumer inflows into stocks, dwindling foreign inflows, and rising bank deposit rates.
Following a big bloodbath last week, the Nifty finished at 18,452 on Monday, up 151 points.
According to Swiss brokerage UBS Securities India strategist Sunil Tirumalai, the Nifty objective for December 2023 is 18,000 points, a full 4 percentage points lower than present levels, since India is among its top underweight economies in the emerging market area in 2023.
The firm also stated that it expects the Nifty up at 19,700 and down at 15,800, with a base scenario of 18,000, down 4% from the present market.
The firm does not provide a target price for the Sensex.
Furthermore, he predicts the Nifty EPS to grow at a 10.5 percent CAGR (Compounded Annual Growth Rate) during the next three years, somewhat lower than the 11% CAGR in the preceding five years due to declining inflationary pressures countered by slower macro and commodity sectors coming off peak earnings.
He believes that values will impact the market’s direction more than profits in the coming year.
Local equities values have re-rated dramatically as a result of domestic flows, he added, with India still trading at a 90 percent premium to emerging markets despite recent underperformance vs China.
“As household flows recede, we expect valuations to normalise,” he said, adding, “their PE target is still 7 per cent above long-term average as we expect the markets to also enjoy some tailwinds from global rates easing in H2 of 2023.”
According to UBS, significant capital inflows into stocks began in June 2020 with tens of millions of first-time investors joining the market and peaked at over Rs 1,40,000 crore in March 2022 before plummeting to roughly Rs 32,000 crore in September 2022. FPI (Foreign Portfolio Investors) inflows were negative over the same time, totaling about Rs 1,50,000 crore and above Rs 40,000 crore, respectively.
Similar to direct stock purchases, fund inflows from households into equities mutual funds have lost steam recently and have begun to decline slowly but remain healthy. After peaking at about Rs 60,000 crore in March 2022, this form of inflows has declined to under Rs 30,000 crore in September.
He predicted that the present surge of household inflows will dissipate, causing values to fall.
