Nifty could be around 16,000 by year-end: Sandeep Bagla of TRUST Mutual Fund

"Market is expecting significant growth in earnings. However, given the global headwinds and the quantitative tightening by Fed, the Nifty could be around 16,000 by year-end, says Sandeep Bagla, CEO, TRUST Mutual Fund, in an interview with Mint Genie.

Edited excerpts:

What is your view on the country's economy for the medium term? Economists are raising concerns about slowing GDP growth, widening trade deficit, and high inflation. What lies ahead for India's macro indicators?

The economy is sending out mixed signals. While labour markets have perked up, travel has picked up, credit offtake has started picking up, and there are dark clouds on the horizon. 

Inflation is shooting up, the FMCG sector is slowing down, and input costs have gone up. Globally, interest rates will head higher and the US Fed will start quantitative tightening - which will increase the cost of capital and reduce the availability of capital at the same time. 

Rising rates could act as ankle weight for the economy and keep it from rising for some time to come.

Do you think US Fed's rate hikes can give confidence to the RBI also to raise rates in the April policy meet?

The mandate of a central banker is to maintain macroeconomic stability in their own country. The US Fed has realised that its narrative of inflation being transitory was false, and has pivoted to take on inflation head-on. When RBI feels that inflation will not come down on its own, I am sure they will consider raising rates

What is your year-end target for Nifty and why do you think Nifty could reach that level by the end of the year 2022?

My broad direction for Nifty is slightly negative. The earnings of Nifty50 stocks are estimated to be around ₹700. Historically, the P/E ratio has been from 10 to 20. 

That gives a fair valuation of Nifty today at 14,000. The market is expecting significant growth in earnings. However, given the global headwinds and the quantitative tightening by Fed, the Nifty could be around 16,000 by year-end.

What sectors are you betting on in this market? Please explain your investment rationale.

We are overweight on PSUs, banking and NBFCs. These sectors are likely to gain as the economy picks up pace.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.