Emkay foresees Nifty at 19,500 and Sensex at 64,500 by December 2023

Emkay Institutional Equities expects the Nifty to touch 19,500 by December 2023 and Sensex at 64,500, indicating a 7-8 percent increase from the current levels.

Barring any major change in the global macroeconomic and geopolitical set-up, the increase in Nifty50’s profit after tax (PAT) in 2023 will be led by banks, believes Emkay Institutional Equities.

Banks will be followed by a PAT uptick in auto original equipment manufacturers (OEMs) and ancillaries, oil and gas, and IT companies.

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“Higher-for-longer interest rates, and a sudden rise in Brent crude oil prices are potential challenges for the market in the next 6-12 months. A capex-intensive budget by the government may spur investment; however global and domestic growth uncertainties may act as an impediment,” Sanjay Chawla, Head, Institutional Research, Emkay Global Financial Services, said.

Expensive valuation is also a near-term headwind to Nifty’s performance. Current price-to-earning ratio of 19x is at a 11 percent premium to 10-year average. “Valuations are not cheap, relative to own-history, bond yields and to MSCI-EM,” the brokerage said. The Nifty now trades at an 86 percent P/E premium to the MSCI-EM index against 10-year average of 45 percent.

Given the set-up, the firm is significantly overweight on banks and autos. It is moderately overweight on insurance, cement, power and utilities, telecom.

It is underweight on IT Services, non-banking financial companies, consumer staples and oil marketing companies.

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