Nifty May Touch 13,400; Sensex 45,500 In 2020, Kotak Securities Says 
Elevators travel next to electronic boards displaying stock figures at the National Stock Exchange of India Ltd. (NSE) building in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Nifty May Touch 13,400; Sensex 45,500 In 2020, Kotak Securities Says 

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The benchmark Nifty may touch 13,400 levels and Sensex 45,500 next year, and sectors like healthcare, agro chemicals, oil and gas are likely to do well, Kotak Securities said on Thursday.

"Market mood is more positive than what is reflected in the real economy mainly due to jump in earnings led by reduction in corporate tax rate and strong FPI flows supported by steady local SIP flows," Rusmik Oza, Senior Vice President and Head of Fundamental Research-Private Client Group, Kotak Securities said at a press meet in New Delhi.

Nifty-50 is trading closer to its peak valuations and is expected to touch 13,400 by end of December 2020. For BSE Sensex the target would work to 45,500 by next year, the Mumbai-based firm added.

At present, the 30-share BSE Sensex is trading at 41,673.92 and broader NSE Nifty at 12,259.70.

Also read: Sensex, Nifty Close At Record Highs For Third Day In A Row As RIL, TCS Lead

On the sectors likely to do well in 2020, Oza named agro chemicals, corporate banks, large non-banking financial companies and housing finance companies, mid cap cement companies, construction, healthcare, oil and gas and mid-cap pharma firms.

Kotak Securities also highlighted the key risks to monitor the markets. Among domestic risks, it said if Yuan weakens with any negative outcome of trade war then INR/USD will fall.

The brokerage house further added that the market is running ahead of the economy and sustained slowdown can pull down the market.

Other domestic risks are monthly Goods and Services Tax collection, which has remained stagnant in FY20 and earnings disappointment.

On global risks, it also discussed issues like final outcome of U.S.-China trade war, global manufacturing slowdown and added that reversal of policy stance by the U.S. Federal Reserve/European Central Bank could hurt flows into emerging markets.

"The disconnect between equity markets and economy could stay for some time as high-frequency indicators are not showing any signs of improvement whereas markets could remain at elevated levels on hopes of certain sops likely to come in the forthcoming Union Budget," it added.

Privatisation could be a big theme in the calendar year 2020. "Strategic sale of BPCL (Bharat Petroleum Corporation Ltd.), Concor and Shipping Corporation can set the ball rolling for other big-ticket divestments," he added.

Better farm income coupled with the series of measures taken by the government and the Reserve Bank of India in this calendar year could help improve demand conditions in 2020.

On the broader market it said, for mid and small caps to outperform the large caps, we need a broad recovery in the economy with improved credit offtake, better print of index of industrial production and gross domestic product growth.

"Hopefully, if the forthcoming Union Budget provides some incentives to taxpayers and investors then we could see a broader rally in the market which could then revive interest in the mid and small-cap space," Oza added.

Talking about broking industry, Ashish Nanda, Executive VP and Business Head-PCG, Commodities and Currency, Kotak Securities said, "consolidation in the broking industry is likely to get expedited as investor confidence is shaken"

"The Karvy incident is unfortunate and isolated. Investors are likely to move to well-known brands having strong compliance and control framework. After all financial services are all about trust. Investors must do business with trusted brands with strong governance practices," Oza said.

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