Sensex headed for 66,600, Nifty for 20,000 in 1 yr; growth policies, earnings to fuel rally, says ICICI Direct

Nifty is currently near its all-time highs and is expected to hit 18,000 soon for the first time while Sensex is close to regaining 60,000.
(Image: REUTERS)

NSE Nifty 50 may rise to 20,000 while S&P BSE Sensex is expected to reach 66,600 in the next one year, helped by pro-growth policies of the government and stronger corporate earnings, ICICI Direct said in a note. The brokerage firm believes that a variety of fundamental factors will drive markets higher going forward. So far this calendar year, Sensex and Nifty are up 25%. Dalal Street has jumped over the wall of worries, be it the second wave of covid-19 or the fears of a third wave. Nifty is currently near its all-time highs and is expected to hit 18,000 soon for the first time while Sensex is close to regaining 60,000.

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What has helped so far?

Analysts at ICICI Direct believe the current rally in Sensex and Nifty has been supported by various factors. Recognition of equity as an asset class that generates inflation-beating returns is seen as the primary reason. “Secondly, with the increase in pace of digitisation, a set of efficiencies have creeped into organisations as well as the economy, indicating better corporate earnings/GDP growth,” the note said. Lastly ICICI Direct highlights that a large number of new Demat account openings is contributing to this outperformance. With the advent of new technology, the reach to equities has increased with more and more retail investors joining the rally. 

What could propel indices higher?

Pro-growth policy action: Among the catalysts that are likely to propel domestic stock markets higher, government’s pro-growth policy measures are seen as one. During the pandemic, the government has launched PLI schemes for various sectors, including new technology for the auto sector. It has also recently announced interim cash flow relief measures in the telecom space. Such policy measures by the central government are seen as positives that may help equities.

Asset monetisation: Going forward, the government’s financial muscle is expected to be stronger with the help of the national Asset Monetisation Pipeline and robust tax collection. The monetisation pipeline could garner Rs 6 lakh crore between this fiscal year and March 2025. GST collections have remained robust, breaching Rs 1 lakh crore mark every month. With strong government finances the money is expected to make its way to capex and infrastructure plans with a ripple effect on the economy, ICICI Direct said. 

Vaccination pace: India’s vaccination pace has grown strongly with now 69% of the eligible population vaccinated with at least one dose. Further, it is expected that 200 crore vaccine doses will be administered by the end of this year. In the post-pandemic world, the higher vaccination rate should help faster economic recovery and thus help the stock market march higher. 

Resurging Real Estate: The Real estate space has seen a pullback recently with record registrations in cities like Mumbai for September 2021 with residential housing prices starting to move northwards in some states. The rebound of the real estate sector after a long lull is seen as a positive for stock markets. 

Start-up street to Dalal Street: After the stellar listing of Zomato, other Indian start-ups are also charting their path towards Dalal Street. Paytm is expected to come up with its IPO soon after having filed drafts papers with SEBI. Others who have filed drafts papers include Nykaa and Oyo. “Maturity of Indian capital markets with start-up unicorns getting listed, thereby expanding market valuations at the blended level,” ICICI Direct said. 

India Inc’s earnings: Corporate earnings have been nearly stagnant in the recent past with FY19-21 Nifty earnings CAGR at ~5%, the report said. The brokerage firm added that currently, India Inc is on the cusp of high double-digit growth trajectory with earnings CAGR over FY21- 23E at ~ 26%. This is seen as the key driver for markets to inch higher.