Defying global trends, Nifty 50 has outperformed most peers in year-on-year (YTD) terms on account of strong domestic inflows – both direct retail and indirect (MF). There are some signs of slowdown in investment from retail investors. Retail inflows turned negative in July 2022 after 10 consecutive months of inflows, with SIP inflows moderating even after hitting record highs. 123 billion in March 2022.
Nifty trading at 19.2x NTM PE, up 21% from its long term average, takes earnings yield-bond yield gap below -2%, highlights BNP Paribas in a note on India strategy Is.
Amid sluggish global demand, higher market valuations, slowdown in retail inflows and lack of a positive catalyst for our earnings projections, the brokerage remains cautious on overall market returns in the short term.
It remains selective on the banking sector with an overweight (OW) rating, noting that it is trading below its 10-year average NTM PE, with improving credit growth and a strong and clean balance sheet.
“We tend to be on the defensive with OW on IT and pharma rather than auto (underweight or UW), consumer staples (UW) and consumer durables (UW), where valuation comfort is low after the recent run-up,” added this.
BNP Paribas There is also UW on the global cyclic (energy and material). While the domestic staples and durables outlook has improved on softening commodity costs, these sectors are trading at a heavy premium to their history and will wait for better entry points.
The Nifty’s rally continued into August, driven by expectations of a peak inflation and thus a less tight stance by central banks, although the market was volatile after Fed Chair Jerome Powell’s Jackson Hole speech, in which he restored price stability. insisted on maintaining a restrictive policy stance for the time being’.
its top stock picks Axis Bank with a target price of 1,130, HDFC Bank (TP: 2,030), Infosys (TP: 1,665), Bharti Airtel (TP: 885), Sun Pharma (TP: 1,074), ITC (TP: 360) and Whirlpool of India (TP: 2,260).
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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