Nifty may hit 20,200 in December on growth outlook, says Axis Securities

While the medium to long-term outlook for the overall market remains positive, volatility is expected in the short run with the market responding in either direction.

India’s share market outperformed global and other emerging markets in the past six months by a notable margin and the structural trend remains positive, analysts at Axis Securities said.

According to the brokerage, India’s economy stands at the sweet spot of growth and remains the land of stability against the backdrop of a volatile global economy.

"We continue to believe in its long-term growth story, supported by the emerging favourable structure as increasing capex enables banks to improve credit growth. Thus, we maintain our December 2023 Nifty target at 20,200,” Axis Securities said.

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The Nifty 50 fell 0.5 percent to 19,436.10 at the close on October 4.
According to Axis Securities, the current level of the India VIX, the volatility index that indicates how rapidly and unpredictably the Nifty 50 is expected to change in the next 30 days, is below its long-term average, suggesting the market is in a neutral zone. While the medium- to long-term outlook for the overall market remains positive, volatility is expected in the short run, with the market responding in either direction.

"Keeping this in view, the current setup is a ‘Buy on Dips’ market. We recommend investors maintain good liquidity (10 percent) to use any dips in a phased manner and build a position in high-quality companies (where the earnings visibility is quite high) with an investment horizon of 12-18 months,” it added.

Midcap and small-cap vs. large-cap

In the month gone by, the broader midcap and small-cap markets outperformed large-caps by notable margins. With the strong catch-up by midcaps and small-caps, the brokerage said the current margin of safety in certain pockets has reduced compared to large-caps. Keeping this in view, the broader market may see some time correction in the near term and flows may shift to large-caps.

"Nonetheless, the long-term story of the broader Indian market continues to remain attractive," Axis Securities said in its report.

Axis Securities is ‘overweight’ on automobiles, banking and telecom, and ‘equal weight’ on capital goods, cement, consumer staples, consumer discretionary, IT, metals and mining, oil and gas, pharmaceuticals, real estate and speciality chemicals.

According to the brokerage, the theme ‘Growth at a Reasonable Price’ looks attractive on account of robust growth expectations, a cooling-off in commodity prices and inflation, rural recovery, and expectations of margin recovery in the upcoming quarters.

Selected value stocks from the PSU, metals, commodities, utility, and cement sectors are well-placed to deliver superior performance.

Top picks for October

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Axis Securities said India’s equity market will continue to trade at a higher premium to emerging markets in 2023 due to relatively robust economic growth, strong earnings outlook, healthy demand across sectors, banking sector in better shape, and private capex cycle expectations.

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