The markets are currently trading at their full valuations despite the recent corrections in the last two months. Valuations are still at 20x levels, and good buying interest will be seen only if it cools down to 17-18 levels, said Shrikant Chouhan, head – equity research (retail), Kotak Securities.
Currently, the Nifty-50 is trading at a valuation of 24.8x FY22E, 21.4 FY23E, and 18.6 FY24E earnings. However, despite valuations being rich, the strong earnings growth in many stocks and sectors provides investment opportunity to investors, said Kotak Securities in its market outlook 2022 on Wednesday.
After a stellar year for the equity markets in 2021 amid intensified Q1 and Q2 earnings, the brokerage said it expects markets to go through some form of correction in 2022 amid the central banks exiting their ultra-loose monetary policies in next few months. Additionally, the Covid-19 waves in various economies and supply chain issues are expected to continue and weigh on global trade and growth.
“In 2022, we expect the interest rates to move up in the country and we can expect two hikes of 25 bps each. The central bank will further change its policy stance to neutral,” said Jaideep Hansraj, MD & CEO, Kotak Securities.
On earnings, the brokerage expects the net profit of Nifty-50 to grow 34.5% in FY22E, 16.0% in FY23E, and 13.3% in FY24E. Further, in the calendar year 2022, the Sensex and Nifty will be seen at around 63,800 and 19,190 (20x FY24E) in the base case scenario, whereas we can expect 69,600 and 21,109 in the best case, said Kotak Securities.
In FY23, investors can expect only incremental growth, primarily from automobiles, BFSI, technology, and oil & gas. “Investors are advised to stay invested in large-caps and be selective on mid-caps and small-caps,” said Kotak Securities.