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Nifty 2022 Target 19,100, No Negative Budget Impact: BofA Securities' Amish Shah

BoFA Securities' Amish Shah sees no negative impact of budget 2022 on the market; sets Nifty target of 19,100 for the year.

Signage for the CNX Nifty Index is displayed in the atrium of the National Stock Exchange of India Ltd. (NSE) building in Mumbai, India (Photographer Dhiraj Singh/Bloomberg)
Signage for the CNX Nifty Index is displayed in the atrium of the National Stock Exchange of India Ltd. (NSE) building in Mumbai, India (Photographer Dhiraj Singh/Bloomberg)

While 2022 will be “full of negative events”, Nifty 50 may end the year at 19,100, according to Amish Shah. And he sees the union budget having no impact on the index.

“The market might see intermittent corrections due to high crude oil prices, rate hikes by the U.S. Federal Reserve and possible upsets for the incumbent party BJP in the upcoming state elections,” the managing director and head of India research for BofA Securities told BloombergQuint’s Niraj Shah in an interview.

India's benchmark Nifty has tumbled nearly 7% in seven sessions in the latest bout of volatility amid concerns of Fed tapering and Ukraine tensions. BofA, however, does not expect that to last.

“...India’s real GDP growth outlook, strong earnings growth, increasing fund flows, and the confluence of capex, real estate and credit growth cycle will aid the market to trade higher,” Amish Shah said. “Compared to other emerging markets, India’s real GDP growth looks stronger and we are expecting India’s GDP to be relatively stable at around 8.3% along with around 20% earnings growth this year."

India, according to Shah, is heading into a phase where on a structural basis, corporate earnings growth can outpace the nominal GDP growth which will mark a trend reversal after a decade.

Shah said even as balancing a reduction of fiscal deficit, generating demand and capex stimulus looks difficult, the government can combine the three in the budget.

"The government will target 20% capex growth and the fiscal deficit number may see a 100-bps (basis-point) contraction in FY23 as the government aims towards achieving their target of 4.5% fiscal deficit," he said.

In addition, if the government clears its arrears and pending payments via the windfall of tax receipts received this year, Shah said the "market will see it as continuing transparency of the budget" and may not react negatively.

Shah doesn’t expect any "positive or negative surprise" on capital gains, suggesting that the finance minister is unlikely to tinker with it.

Watch the full interview here: