On Wednesday, Kotak Securities issued a target of 13,500 for Nifty for the end of the calendar year 2021, approximately around where the NSE index is at present.
Nifty 50 closed at 13,682.70 on Wednesday.
The brokerage cited steep valuations and interest rate risks while issuing the outlook on the index despite building in substantial growth in Earnings Per Share (EPS).
According to Kotak Securities, Nifty EPS, which was at Rs 453 in the financial year 2019-20, will rise 8% in FY21, 29% in FY22, and 19% in FY 23. The brokerage said that the long term average forward PE ratio of 19 results in a target of 13,500 for the end of the calendar year 2021.
FII (Foreign Institutional Investors) inflows in the cash market in 2020 have been around $19 billion in the calendar year 2020, up from $14 billion in 2019, driving up market valuations.
However, Kotak Securities noted that investors will be able to generate returns from stock picking in the coming year even if the benchmark index remains flat.
The brokerage is bullish on the banking and finance sector while remaining cautious on pharma stocks after the run-up in 2020.
Further, it expects the surge in Demat accounts witnessed in 2020 to continue in coming years, noting that the unlocking of the economy has not slowed down the pace of account opening.
Kotak Securities expects the total number of Demat accounts to increase from 4 crore at the end of FY20 to 6 crore at the end of FY21.