Sensex, Nifty hit all-time highs; how far can markets rise this year

Sensex hit its all-time high and Nifty breached the 14,500 mark today on hopes from the ongoing Q3 earnings season and higher global markets expecting economic stimulus from new president Joe Biden.  The 30-share index rose 300 points to a record high of 49,569 and Nifty gained 106 points to 14,590, its all-time high.

On Monday, Sensex closed at 49,269 and Nifty ended at 14,484.  On an yearly basis, Sensex has risen 19.04% or 7,918 points.  Similarly, Nifty has clocked a gain of 18.85% or 2,310 points.

Compared to its four-year low of 25,981 hit on March 23, 2020, Sensex has gained 90.78% till date. Similarly, Nifty has clocked a gain of 91.72% from its March 23 low of 7,610.

The sentiment in equity market is so bullish that in eight trading sessions of 2021, Sensex and Nifty have gained 3.76% or 1,793 points and 4.17% or 583.35 points, respectively.

Going ahead, analysts are positive on the movement of Sensex and Nifty.

Hemang Jani, head equity strategy, broking and distribution at Motilal Oswal Financial Services said, "In 2021, the markets are sitting at all-time highs and are showing resilience on the back of abundant liquidity, positive developments on the vaccine front and signs of economic recovery. More importantly, COVID-19 active cases have seen a meaningful decline in India.

Share Market Highlights: Sensex ends at record high, Nifty at 14,563; Bajaj twins, TCS, RIL, L&T top gainers

Improved corporate earnings have also buoyed the market sentiments. Our FY21E/FY22E Nifty EPS estimates have been upgraded by 4%/3% to Rs 516/ Rs 699 (prior Rs 497/ Rs 677). We expect Nifty EPS to now grow by 11% in FY21E, a solid performance given the unprecedented disruptions.Thus, the overall structure of the market remains positive. At 21 times FY22 earnings, Nifty valuations are also not cheap as it is trading higher than its long-period averages of 19x.

With the economic activity continuing its recovery, it could lead to start of earnings upgrade cycle. Further liquidity flows across Emerging Markets could remain strong which bodes well for Indian markets. However, intermittent corrections cannot be ruled out. From next 12 months perspective, we are positive on IT, BFSI, Healthcare, Telecom, Auto and Consumer sectors."

ICICI Securities has given a target of 16,200 for Nifty in 2021.

The brokerage in a note said, "Intermittent corrections should be used as buying opportunities. In 2021, Nifty is expected to remain in a structural bull phase with an upside target of 16,200 that is implied by the three year's consolidation breakout (12,200-8,000)."

"Within the bull phase, a normal correction of 15-20 percent cannot be ruled out. However, such a correction should not be construed as negative. Rather it should be capitalised on as an incremental buying opportunity with key support at 11,400," it added.

The brokerage is bullish on the equity markets this year and has listed out factors that will push indices to new highs.

Expectation of low interest rate environment

• Central banks intending to keep interest rates low for the first half of 2021 is the key catalyst for equity markets to continue to outperform

Covid-19 Vaccination drive

• With the onset of a mass-vaccination drive against the pandemic, the bull market's record streak has much room to grow this year

Lower volatility

• After a year of massive volatility, the economic outlook has turned extremely positive this year.
• Expect less business uncertainty and transparency with new presidency in US
• Emerging markets should be the key beneficiary with massive runway for capital deployment

Vinod Nair, Head of Research at Geojit said, "We can expect mid and small caps to outperform the main index. Importantly, easy fiscal and monetary policy should be maintained in the world, as seen in 2020, which is possible due to low employment. Indian government is expected to maintain the reformist agenda and deliver a forward looking Union Budget, providing an edge to India compared to other EMs."

Brokerage Jefferies has given a target of 15,800 for Nifty by December 2021.

"Nifty currently trades at 22.3 times 12M forward earnings - more than 1sd above the past 10-year range. However, our favourite (bond yield - earnings yield) metric shows that the valuation is close to averages. Favourable global backdrop should continue to drive foreign inflows and we expect overall domestic retail participation (including direct participation) will be supportive. Our Nifty target implies a 20x 12M forward PE - 10% derating from the current level," the brokerage said.

Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities said, "We expect Nifty50 to report 19% earnings growth in Q3FY21 with likely upgrades coming in sectors like, automobiles, auto-ancillaries, metals & mining, cement, select banks and pharmaceuticals. Expect Nifty to go anywhere between 14,500 & 15,000 before the Budget."

Why DLF share price rose 13% today