Wall Street brokerage Bank of America Securities has lowered its base case Nifty return target and the index is forecast to close at 16,000 a year, down from 17,000, due to the rapid rise in expected interest rates by the Reserve Bank and inflation concerns. Before
On the negative side, the brokerage warned of a 15 per cent correction and that the index would close at 13,700 by December.
After scaling many new heights, Dalal Street ended 2022 with a financial gain of 18 percent, and Calendar 2021 with a profit of 24 percent.
After an eventful 2020, benchmarks showed strong resistance in 2021 as the economy showed signs of recovery and the Sensex rose 21.99 percent and the Nifty rose 24.11 percent.
At FY 22, the Sensex returned 18.29 percent and the Nifty 18.88 percent
In a report on Tuesday, BofA (Bank of America) Securities said it was seeing flat market returns from current levels as it fell below the Nifty’s target of 17,000 points in December to 16,000.
The revised projection is based on a quick-before-before-tightening by the Reserve Bank (by 40 basis points in an off-cycle growth earlier this month) as well as central banks in other key countries.
The report specifically listed the front-loading of 50 basis points in May and similar rate increases in June and July by the US Federal Reserve; Rising domestic inflation – the CPI (Consumer Price Index) – hit an eight-year high of 7.8 percent – and brokerage saw it average at 6.8 percent, compared to the FY23 vs. RBI estimate of 5.7 percent.
The report cites the current volatile crude price decline, turnaround in FII (foreign institutional investors) inflows and the rupee’s downturn as upward risks to this outlook, but underlines that global inflation is coming in ahead of the 40-year high in print and US. , Resulting in faster-than-expected growth, the main negative risk.
In this negative scenario, the Nifty’s valuation on the brokerage has shrunk to 15.8 times its long-term average, bringing the index down to 13,700 levels.