Market gains likely to be muted in 2022; 9% upside for Nifty by Dec: Report

Dalal Street may not sustain the record run it had from the middle of 2020 as the new year will see bouts of corrections leading to tepid gains given the many downside risks to a sustained rally, says a brokerage report.

Wall Street brokerage Bank of America Securities India expects the market gaining around 9 per cent from the present levels and the Nifty hovering around 19,100 by December. The brokerage does not offer a target for the benchmark index Sensex.

The market rally that began from June 2020 and lasted till October 2021 will not hold this year and the return will be in high single-digit of say up to 9 per cent, Amish Shah, a research analyst at the brokerage, said and expects Nifty at 9,100 by December.

He also noted that despite high valuation -- the highest among EM (Emerging Market) peers by around 28 per cent and also the world stocks by around 22 per cent -- domestic equities continue to be attractive and is second only to Taiwan when it comes to returns.

Shah sees rising COVID cases amidst the threat of newer variants hitting the world economy and stocks in 2022 along with central bank closing the liquidity tap faster than expected due to the spiralling inflation, stronger greenback putting pressure on the rupee and other factors.

According to him, at least four rate hikes of 25 basis points are expected from June and rupee might touch 77 against the US dollar.

Besides, crude prices are likely to scale USD 120 level in the first half and then fall to an average of USD 85 a barrel, and that will be a recurring threat to a large rally this year, according to Shah.

Further, he pointed out that such short term events may lead to intermittent market corrections throughout the year.

However, the rising share of private sector investments with the government ending apex public sector monopolies to private and foreign capital will see the market holding ground as past experiences have proved that whichever government sector was opened up to the private sector none of them disappointed, he said.

According to Shah, more private participation is expected in the railways, coal mining, airports, defence production, and gas and power grids. The government has set a target of selling its assets worth USD 80 billion by 2025.

Private sector money will also flow into power transmission and generation, telecom, warehousing, mining, building natural gas petroleum pipelines, aviation, urban real estate, ports and stadia.

BofA Securities expects the economy to clip at 9.3 per cent this fiscal and 8.3 per cent next financial year.

The brokerage is overweight on financials, industrials, autos, IT and utilities and underweight on materials, discretionary, staples, healthcare and energy sectors.