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Nifty could post 5% gains in 2023: BofA Securities

Global brokerage firm Bank of America (BofA) Securities expects benchmark Nifty 50 index to rise roughly 5% in 2023 due to looming global recession concerns. This would be its slowest growth in five years, BofA Securities estimated, but also said Indian stocks were a good bet if a global recession struck.

The foreign brokerage expects the bluechip index to end at 19,500 points next year, while continuing to be volatile and trade between 17,000 and 20,000 levels for the year.

On Tuesday, the broader NSE Nifty advanced 110.85 points or 0.60% to settle at 18,608.

The Nifty 50 index is up slightly over 7% at 18,584 in 2022 till now, after three straight years of double-digit growth. This year has also been volatile with the index swinging between a low of 15,183.40 to a record high of 18,887.60.

Ajit Mishra, VP – Technical Research at Religare Broking, said, “After the initial uptick, the Nifty index gradually inched higher and settled around the day’s high to close at 18608 levels. Continued buoyancy in the banking pack combined recovery in the IT majors played a key role in recovery while others traded mixed.”

“On the index front, Nifty could find a hurdle around 18,750 and the banking index may take a breather around 44,250 levels,” Mishra added.

Buy the dips at around 17,000 levels

BofA Securities advised buying any dips at around 17,000 levels, saying India’s economic growth and equities are less impacted during a recession and recover faster after one.

Based on an analysis of the past three US recessionary cycles, the brokerage firm said, “Indian markets deliver much higher returns against the US, 12 months post a recession.”

Even valuations are unlikely to contract below the long-term average, the brokerage said, as domestic investors could see $20 billion in inflows from pension, provident, insurance funds and systematic investment plans.

And with foreign institutional investors (FII) ownership of Indian equities at a multi-year low of 18% now, the potential for incremental outflows from FIIs is limited, it said.

In fact, there could be inflows into emerging markets as the US Federal Reserve could be forced to start cutting interest rates early if there is a pronounced downtrend in consumer price inflation, BofA Securities said.

Analysts at BofA remain overweight on sectors like financials, industrials, staples, utilities, metals and cement, and underweight on IT, healthcare, consumer discretionary and autos.

“The uptrend texture is likely to continue in the near future and 18700-18725 would be the next resistance zone for the bulls. On the other hand, a fresh selloff could be seen only after the dismissal of 18450,” said Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities Ltd.

With agency inputs

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