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Expect no Nifty return in 2021, says Kotak Securities

  • According to Kotak Securities, Nifty EPS--at 453 in FY20--will rise 8% in FY21, 29% in FY22, and 19% in FY 23. A long term average forward PE ratio of 19 results in a target of 13,500 for end of calendar year 2021, the brokerage said

MUMBAI: Kotak Securities on Wednesday issued a target of 13,500 for Nifty for the end of calendar year 2021, approximately where the index is at present.

At the time of writing, the Nifty50 index was at 13,682. The brokerage cited steep valuations and interest rate risks while issuing the outlook. The target comes despite building in substantial growth in Earnings per Share (EPS).

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According to Kotak Securities, Nifty EPS--at 453 in FY20--will rise 8% in FY21, 29% in FY22, and 19% in FY 23. A long term average forward PE ratio of 19 results in a target of 13,500 for end of calendar year (CY) 2021, as per the brokerage. FII flows in the cash market in 2020 have been around $19 billion in calendar year 2020, up from $14 billion in 2019, driving up market valuations.

In a positive, Kotak Securities noted that investors will be able to generate returns from stock picking in the coming year even if the benchmark index remains flat.

It took a bullish stance on banking and finance while remaining cautious on pharma stocks after the run-up in 2020.

Jaideep Hansraj, MD and CEO of Kotak Securities, said the surge in demat accounts witnessed in 2020 is likely to continue in coming years, noting that the unlocking of the economy has not slowed down the pace of account opening. The number of demat accounts have risen this year, with Kotak Securities expecting a net addition of 1 crore accounts in 2020 compared to 50 lakhs in FY20 and 40 lakhs in FY19. This would increase the total number of demat accounts from 4 crore at the end of FY20 to 6 crore at the end of FY21.

According to Hansraj, Kotak Securities added around 1 lakh clients to its tally of around 6.5 lakh active clients.

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