Kotak Securities on Wednesday said its target for the Nifty would remain at 13,500 for the calendar year of 2021. The brokerage said it expects the markets to remain buoyant in the first quarter of 2021, but after that there could be some withdrawal of accommodative stance by central banks and disappointment from quarterly earnings. The target for Sensex from the brokerage is at 46,000.
The brokerage explained that the first quarter of 2021 ahead of the Union Budget is poised to see strong foreign portfolio inflows which could keep the stock markets buoyant. It estimates an FPI inflow of $15-20 billion for 2021. However, the markets could see some central banks reverse their accommodative stance, which could push yields up, and as a result, the equity price earnings could start retreating to its long-term mean.
Jaideep Hansraj, managing director and chief executive officer, Kotak Securities, said: “We expect moderation in monetary policies and rising yields scenario in H2 CY2021, which will lead to mean reversion of valuations towards 10-15-year averages. We expect Nifty-50 to end CY21 at close 13,500 and BSE Sensex to close at 46,000.”
Kotak Securities said going forward, cyclical sectors and stocks could score over defensives in 2021. Within defensives, select consumer staple or FMCG companies could also deliver better returns due to the sector’s underperformance in 2020. In cyclicals, investors can focus on select large banks, capital goods, oil and gas, cement, utilities as well as metals and mining.
The research team of the brokerage said the market rally in 2021 will be driven by the dollar index, oil prices, Covid-19 vaccine, inflation and interest rates. However, risks for the market going forward would be any stress in the financial sector, a weak investment cycle and possible adverse global liquidity issues.