BofA Securities says market may remain sideways in near term, sees Nifty@17K

NEW DELHI: BofA Securities said the market is likely to remain sideways in the near term, given inflation impacting volume growth and margins across several sectors.

The foreign brokerage has suggested a year-end Nifty 50 target of 17,000, suggesting no upside ahead.

BofA felt that despite markets correcting since the October 2021 peak, the prevailing 1-year forward Nifty valuations at 19.2 times look elevated given global geopolitical, monetary tightening and elevated inflation backdrop.


It noted that MSCI India valuation premiums to EM at 38 per cent and World at 10 per cent long term averages (LTAs) remain elevated.

"However, we believe long-term this premium is justified as India is better placed amongst EMs," it said.

The foreign brokerage said that the large-cap valuation premiums to both mid and small caps have expanded in 2022 in response to heightened geopolitical risk as investors turned cautious.

Based on data reported so far by NSE500 companies, BofA said FII ownership levels stood below Covid lows at 19.5 per cent, adding that it has also seen a moderation in India's overweight position.

"Potential reversal of outflows could see ownership levels turn around," it said.

BofA Securities said it prefers financials, industrials, select autos among cyclical and utilities and healthcare among defensives.

BofA noted that March saw FII outflows at $5.4 billion, which was the highest since March 2020.

Though month to date April 2022 FII outflows have slowed down, active funds (down $5.1 billion) continued to drive outflows while passive funds (down $284 million) saw the highest outflows since June 2020. Year-to-date FPI flows stood at $15.7 billion, it noted.