Sensex could hit a new high in 2022, foresee brokerages

A sharp pull-back in index heavyweights Bajaj Finance, Reliance Industries and HDFC dismantled a firm set-up in the markets on Monday.
After starting gap-up and reclaiming crucial psychological levels of 59,000 and 17,600 in intra-day deals, the BSE Sensex dropped OVER 500 points to end at 58,283 levels.
The Nifty50, on the other hand, shut shop at 17,368, down 143 points.
Individually, shares of Bajaj Finance cracked 3 per cent after global brokerage CLSA gave a ‘sell’ rating to the consumer financier.
Further, it believes the stock is likely to undershoot investors’ expectations over the medium-term. Overall, it has a target price of Rs 6,000 on the stock which translates into 17 per cent downside from current levels.
The rub-off effect hit shares of Bajaj Finserv as well, which dropped 2 per cent on the bourses yesterday.
This, and the nervousness in the global markets ahead of key central banks’ meetings this week, markets may keep indices volatile on Tuesday as well.
Moreover, reaction to inflation data, initial public offers of MedPlus Health, Data Patterns and Metro Brands, listing of Anand Rathi Wealth, Analyst meet of ITC, and news flow around the severity of the Omicron coronavirus variant will keep investors on their toes today.

As we come closer towards the new year, holiday season in the overseas market and subsequent thin trading may keep indices range-bound over the next few sessions.
Further, volumes may pick-up with the on-set of 2022, where equities, as an asset class, will continue to remain investors’ favourite.
According to analysts, peaking US inflation and modest policy easing in China into the first quarter of 2022 should provide relief. Here’s a lowdown of what some of the key global brokerages are expecting from the markets in 2022.

According to analysts at Jefferies, Asia's performance in 2022 will be dominated by significant changes in China, and investors should keep a close eye on further cooling of the mainland economy.
As regards India, the brokerage believes the country has entered a period of an economic super-cycle driven by a housing cycle turnaround. It estimates over 7% GDP growth and over 15% earnings growth for FY23.
It says any correction due to inflation, valuation, and the US Fed rate hike should be used to add cyclicals.
The brokerage remains overweight on financials, property and autos, and expects markets to hit a new high in 2022.

“Global liquidity is on course for a peak around March 2022. We forecast the G-4 central banks’ balance sheets to expand by another $750 billion by that time and then peak out. Markets are likely to reach a high around the same time and face downward bias as the earnings cycle in China surprises very negatively and the US dollar remains strong.”

For analysts at Bank of America, global liquidity is on course for a peak around March 2022.
They expect the balance sheets of G-4 central banks to expand by another $750 billion by that time and then peak out.
Markets, too, will likely reach a high around the same time and may, then, see a downward bias as the earnings cycle in China surprises negatively and the US dollar remains strong.

Credit Suisse also foresees attractive returns from global equities in 2022 with earnings remaining the key driver.
Domestically, Nifty earnings per share is projected to grow 15% annually over FY19-24, with financials contributing nearly half the growth during the period.
The brokerage prefers domestic cyclicals over global cyclicals, and is overweight on financials, industries and cement. Among individual stocks, SBI, HDFC and UltraTech Cement are its top picks.

Morgan Stanley analysts have the most conservative estimates as they expect emerging market equities to struggle in 2022.
While they are more constructive on Japan equities, and see 12% upside to their TOPIX target of 2250, they are cautious on India.
With a 50% probability, they see the Sensex hitting 70,000-mark in their base case scenario by December 2022.
In a bull case, it may rise to 80,000 level or may fall to 50,000 mark in a bear-case.

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