BofA Securities revised its Nifty target from December 2022 to 17,000 from 19,100 to price in the risks on account of increasing interests rates and bond yields. The brokerage said that it now anticipates a fast fed hiking revolution.
“Our US economists are now anticipating seven rate hikes in CY22, starting March 2022 and a more of four hikes in CY23, of 25bps each. Further, there are concerns raising around a emerging 50bps hike in March, 100bps by July and inter-meeting hikes, amongst others. In India, we are waiting for RBI hikes by 100bps, by March 2023,” BofA said in a note.
The note added that the market valuation narrows if it is above the long-term averages prior to the start of the hike revolution. Nevertheless, the note included there have been incidents of Indian markets producing positive returns during rate hikes by RBI or Federal Reserve driven by earnings rise, even as valuations restricted.
The note highlighted that political stability is a great risk and the market’s breadth seems to narrow, and volatility could hike.
