‘Remain Selective As Macro Support Wanes’: Nomura – Times Now

Mumbai: Saion Mukherjee of Nomura in India Equity Strategy Outlook 2022 report said that liquidity tightening is largely expected, but the pace of tightening can be faster than expected as inflation is rising vs expectations as well as tight labour market and supply constraints are increasingly making Central banks hawkish.

Domestic growth of most segments particularly consumption and services are well below the pre-pandemic growth trend. The impact of a supportive monetary policy is negated by weak consumer sentiment and ongoing disruptions from the pandemic. Nomura’s Nifty Dec-2022 Nifty target is 18,150 based on 18.5x Dec-2023 FY earnings. 

Talking about corporate earnings in India, Saion Mukerjee said that earnings are recording a strong revival, led by pre-pandemic efforts on cost control and disciplined capital allocation, and post-pandemic impact of market share gains, higher commodity prices, and lower costs.

According to Mukherjee investors will increasingly focus on earnings growth in corporate earnings beyond FY24F, which will be increasingly dependent on the broader economic growth. Interestingly he said that the pandemic has accelerated the earnings recovery process due to market share gains by large players, lower operating costs, and higher commodity prices.

In terms of a ‘Portfolio construct’ Mukherjee continues to be selective with a defensive bias, given a cautious view on liquidity and growth. From a sectorial perspective, Nomura is overweight on Information Technology, Pharma, Telecom & Infra/construction & Underweight on consumption/ metals.

Nomura prefers ancillary/staples over OEM/discretionary. They are selective in financials with a preference for insurance, private banks with low growth expectations. Our top picks are Infosys, Axis Bank, L&T, SBI LIFE, Lupin & Bharti Airtel.