UBS sets 9,500 Nifty level for March 2019 as base case

Mumbai: UBS set a target of Nifty at 9,500 as its base case for March 2019, and 11,100/8,300 as upside/downside scenarios on Monday, and said it implied it is not yet time to buy on dips.

“The base case is premised on 13%/17% earnings growth in FY19/FY20 (7-9% lower than Street estimates) and 16x PE (price to earnings), in line with the last 5 year average,” UBS analysts Gautam Chhaochharia and Prashant Mittal said.

On Monday, Nifty closed 0.24% lower at 10,528.20 points.

Earlier, UBS had Nifty December 2018 target of 10,500 and upside/downside scenarios of 11,900/8,800 points. UBS pointed that the market has de-rated from 19 times 1-year forward PE to 16 times.

UBS said it does not expect the recent liquidity squeeze to turn into a prolonged credit crunch, though the era of easy money of the last 3-4 years is behind us. Also, the worst of rupee depreciation vs. global emerging markets may also be over.

“However, two risks remain: 1) Will Modi win in 2019?; and 2) retail flows,” UBS analysts said expressing their concerns.

“2HFY19 may also not enthuse markets, as the base effect is wearing off and the impact of tight liquidity is being felt,” they added.