Lockdown fallout: ICICIdirect lowers Sensex target for FY22 to 33,500
https://www.moneycontrol.com/news/business/markets/lockdown-fallout-icicidirect-lowers-sensex-target-for-fy22-to-33500-5138011.html
COVID-19 is a black swan event with far-reaching implications for businesses worldwide as well as for stock markets. In a recent research note, ICICIdirect revised its target for both Sensex and Nifty50 downwards for the year 2020 as earnings are likely to take a hit.
“The Indian economy is no exception with a stringent 21-day lockdown period underway. With almost nil manufacturing activity in this 21-day period and slow ramp-up thereafter amid subdued consumer sentiment, we downgrade our Nifty earnings estimates to the tune of 4% for FY20E, 18% for FY21E and 13% for FY22E,” said the report.
“Incorporating the downward revision, we now expect Nifty earnings to grow at a CAGR of 13.2% in FY19-22E versus the expectation of 18.6% CAGR in the past,” it said.
The report further added that valuations for Nifty have corrected more than anticipated with the Nifty now trading at 13.3x P/E on FY22E numbers, compared to its one-year forward average P/E multiple of 15x.
“Valuing Nifty in tandem with its long period averages, we now value the Nifty at 10,250 i.e. 15x P/E on FY22E EPS of 682. The corresponding target level for the Sensex is at 33,500. We remain constructive on domestic equities and recommend a buy at these levels,” said the note.
Change in Sectoral Earnings:
Granularly analysing the earnings downgrade across different sectors, ICICIdirect concludes that the downgrades have been sharp in the commodity pack (oil & gas, metals); courtesy a drop in global commodity prices, particularly crude oil as well as auto space.
The impact has been somewhat in line with consolidated downgrades across the BFSI segment. We witnessed upgrades in the pharma and FMCG pack.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
COVID-19 is a black swan event with far-reaching implications for businesses worldwide as well as for stock markets. In a recent research note, ICICIdirect revised its target for both Sensex and Nifty50 downwards for the year 2020 as earnings are likely to take a hit.
“The Indian economy is no exception with a stringent 21-day lockdown period underway. With almost nil manufacturing activity in this 21-day period and slow ramp-up thereafter amid subdued consumer sentiment, we downgrade our Nifty earnings estimates to the tune of 4% for FY20E, 18% for FY21E and 13% for FY22E,” said the report.
“Incorporating the downward revision, we now expect Nifty earnings to grow at a CAGR of 13.2% in FY19-22E versus the expectation of 18.6% CAGR in the past,” it said.
The report further added that valuations for Nifty have corrected more than anticipated with the Nifty now trading at 13.3x P/E on FY22E numbers, compared to its one-year forward average P/E multiple of 15x.
“Valuing Nifty in tandem with its long period averages, we now value the Nifty at 10,250 i.e. 15x P/E on FY22E EPS of 682. The corresponding target level for the Sensex is at 33,500. We remain constructive on domestic equities and recommend a buy at these levels,” said the note.
Change in Sectoral Earnings:
Granularly analysing the earnings downgrade across different sectors, ICICIdirect concludes that the downgrades have been sharp in the commodity pack (oil & gas, metals); courtesy a drop in global commodity prices, particularly crude oil as well as auto space.
The impact has been somewhat in line with consolidated downgrades across the BFSI segment. We witnessed upgrades in the pharma and FMCG pack.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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