Bernstein expects a quick Nifty rebound; accumulate on dips, says Goldman Sachs

Bernstein
The firm has set a year-end target of 18,000-18,500 on the Nifty, implying an upside of 2.5-5.4% from Wednesday’s close of 17,557.

“Our call is premised on the room for a bear market rally led by specific factors,” said Bernstein’s Venugopal Garre and Ankit Agrawal, in a note to clients. “Overall equity returns will still be modest this year as the global downturn could be long, and OPEC’s decision to cut crude supply over the weekend reinforces our view that inflation risks remain.”

The firm said a longer period of higher interest rates, lack of buffers, the risk of monsoon, and stagnant economic growth are the factors that could cap Nifty upside at 18,000-18,500.

Financials, real estate, and cement will outperform in this rebound, said Bernstein. Staples and utilities will underperform.

Goldman Sachs
Goldman said Indian equity valuations, although not cheap, have come down to reasonable levels. The brokerage has set a target of 20,000 on the Nifty by March 2024, implying an upside of around 13.9% over Wednesday’s close.”While the market could remain choppy in the near-term, amid heightened global uncertainty, deeper corrections beneath the headline index suggest opportune time for medium-term investors to bottom-fish over coming months,” Goldman’s analysts including Sunil Koul and Timothy Moe, wrote in a client note.

MSCI India was the worst-performing index in Asia and across key markets globally in the March quarter, said the brokerage. Thanks to the underperformance, India’s valuations premium has halved from a record peak of 100% in the December quarter to 45% currently. The historical average is 30%.

Goldman said MSCI India at 19 times estimated P/E is 13% above the long-term average, about 20% lower compared to its peak of 24 times about a year and a half ago, and closer to its ‘fair value’ estimate of 18.5 times.