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Brokerage firm YES Securities believes that the benchmark equity index BSE Sensex may rally another 14% by the end 2020. The 30-share index has already advanced 10% to 52,300 on a year-to-date basis till June 10.
With a rally of 57% YTD, State Bank of India emerged as the top gainer in the Sensex pack. Shares of the public sector lender have advanced to Rs 432.25 from Rs 274.75 on December 31 last year. Bajaj Finserv, ONGC, Power Grid, UltraTech Cement, Bajaj Auto, Axis Bank and ICICI Bank have also gained between 19%-35% during the same period.
Commenting on the ongoing rally on Dalal Street, Amar Ambani, Senior President and Institutional Research Head, YES Securities said, “The stock market is solely focused on the future. Hopes of a quick economic revival post unlock and expectation of a large number of the adult population vaccinated in 2021, are keeping markets excited. Q4FY21 earnings have been encouraging, even after adjusting for the low base of March 2020.”
He further added that it is very likely that the top 10 heavyweights of the Sensex, which have been dormant for some time, will begin to participate. Already Reliance Industries has resumed its up move after a lull of six months. “This will add to the strength of Indian equities,” Ambani said adding Sensex is likely to hit 60,000-mark by December 2021.
Overall, the Indian equity market is looking expensive in terms of valuations. The price-to-earnings of Sensex is hovering at around 32x as against its 10-year average of 21.68x. Kotak Mutual Fund said, “Valuations are at the higher end of fair value. However, every correction is an opportunity to increase allocation to equity.”
On the other hand, Ajit Mishra, VP-Research, Religare Broking said, “We believe the positive bias would continue on the back of buoyant global markets and encouraging local cues. Ramp up in vaccination would also aid faster economic recovery and subside the lingering fear of the third Covid wave. Additionally, we expect earnings to recover meaningfully in FY22 and FY23 and it would reflect in the stock prices as well.” He thinks Nifty has the potential to cross 16,400 by Diwali, while Sensex will cross 55000-mark.