Sensex, Nifty to scale new highs by FY23-end: Emkay Global

Benchmark indices may scale new highs by the end of FY23 and Nifty-50 could be around 19,000 levels during the same period, Emkay Global Financial Services said on Wednesday. However, the broking firm expects only 10% returns from the indices in FY23 against 18% delivered in FY22, due to several factors, including the geopolitical crisis, rising crude prices and hawkish central banks.

On valuations, Emkay said the current Nifty valuations at 19.4x remain expensive when compared to the 20-year average of 16.1x. However, when compared with the 10-year average of 18.6x, the valuations seem to be reasonable. “From 22x during the peak last year, the valuations have come down to 19x, which is a little above its 10-year average and looks reasonable as of now. Comparing the current valuations with the 20-year average isn’t right as composition has changed towards growth stocks,” said Nirav Sheth, CEO, institutional equities, Emkay Global Financial Services.

“Profit growth for Nifty-50 in FY22 is likely to surpass 40%, despite a weak Q1 in the wake of the deadly second Covid wave, and a muted Q4FY22E, partly impacted by the Omicron wave and higher commodity prices,” said Emkay. For FY23, it expects profit growth of 20% for Nifty, with six stocks (Tata Motors, RIL, ONGC,Airtel, SBI, and HDFC Bank) accounting for two-thirds of growth. Around 70% of Nifty aggregate profits come from the four major sectors – banks, oil & gas, IT services and metals/mining. Except for banks, the other three major sectors have potential for earnings upside, Emkay said on Wednesday.

Emkay also expects the inflows from foreign investors to return by the second half of the financial year, tracking economic progress and ease in commodity prices. So far this year, outflows from FPIs have reached close to $15 billion, data from NSDL shows.