The target price implies a modest 8.4% upside from Tuesday’s close of 11,994.20 points.
Goldman Sachs expects Nifty50 to touch 13,000 points by the end of 2020, as valuations have partly priced in recovery in economic growth. The target price implies a modest 8.4% upside from Tuesday’s close of 11,994.20 points.
With the flows into domestic mutual funds through systematic investment plans (SIP) remaining strong despite volatile equity markets, the Nifty50 has yielded a dollar return of 12.2% so far in 2019. The broader Nifty50 has outperformed both Kospi and Jakarta Composite in calendar 2019. While Kospi has gained 8.6% in dollar terms, Jakarta Composite has come off by 1.3%.
The Taiwan TAIEX rallied 12.5% during the same period. “We think growth has likely bottomed out in India and we expect cyclical macro recovery next year,” Tim Moe, chief Asia-Pacific equity strategist, said on Tuesday.
The global investment firm is of the view that corporate earnings in India will recover next year with the MSCI India Index’s 2020 earnings expected to pick up from 12% this year to 16% next year. That will be the second-highest EPS growth forecast in the region after Korea. For Korea, the earnings growth would be 22% for 2020. The earnings recovery in India is likely to be driven by financials and domestic cyclical sectors.
According to Goldman Sachs, most markets, except Hong Kong, Singapore and Philippines, are trading well above their historical average on a PE basis. India remains one of the most expensive markets in the world.
At its close of 11,994.20 on Tuesday, the Nifty50 now trades at a price-earnings (P/E) multiple of 18.5 times to the estimated one-year forward earnings, against the long-term average PE of 15.5 times. This compares with 11.4 times for Kospi and 14.4 for Jakarta Composite, Bloomberg data showed.
Among emerging markets, India witnessed highest foreign inflows so far in 2019. Foreign portfolio investors (FPIs) have pumped in $13.4 billion into India since January 2019 against nearly $9 billion inflows into Taiwan. While Indonesia saw an inflow of $2.9 billion, overseas investors sold Korean shares worth $638 million, the data showed.
Apart on India, Goldman Sachs is also stays overweight on Korea and China (Offshore).