Continuing the upward march charted in recent days, domestic headline index Nifty 50 may rise 11.6% to claim 21,000 levels by December this year, said analysts at Yes Securities. “With abundant liquidity to keep equities in the reckoning and growing institutional participation in the Indian markets, India is expected to continue gaining share in the emerging markets basket,” Yes Securities said in a note. The brokerage firm expects Nifty to reach 21,000 this year and then 32,000 by 2025. So far in the first week of 2022, domestic markets have risen a strong 3%.
What will aid growth in 2022 and beyond
Household consumption: Analysts believe India’s household consumption will increase by 46% over the next four years. Yes Securities estimates that net income available for consumption, after-tax and saving, is currently at Rs 131.2 trillion. This is expected to surge to Rs 191.5 trillion by financial year 2025-26. This rise will be aided by a growth in the average annual income of a household and the spendings by Gen Z and Millennials. Further, 80 million jobs are expected to be added by the gig economy
Strong earnings growth: Yes Securities believes that earnings growth for India Inc will be strong over the next 3 years. The average Nifty EPS growth between the financial year 2011 and 2020 was 6%. Analysts expect the same to average 23.4% between the financial year 2021 and 2024. India Inc has been witnessing strong earnings in the last few quarters. For the last five consecutive quarters, Nifty 50’s earnings have been upgraded, leading to the best run in a decade. Yes Securities further said that a large number of sectors such as Telecom, Capital Goods, Asset Management, Banks, Real Estate, Cement, among others are now coming out of the woods.
Gradual rise in capital costs: While global stock markets do impact Indian equities, Yes Securities predicts that US Taper Tantrums will not spoil the party on Dalal Street. “Rise in the cost of capital will be extremely gradual with US FED normalizing ultra-cheap monetary policy,” they said. Currently, interest rates are at their lowest but central banks have hinted at tightening of their monetary policy with the Bank of England even raising rates earlier. Yes Securities believes any increase in borrowing costs will be offset by the strong earnings of India Inc.