Worsening of the Russia-Ukraine conflict and continued sanctions on Russia could see the Nifty at 14,000 by the end of the year, with a completely defensive skew, it said.
Global markets have been roiled in the last few weeks by Russia’s invasion of Ukraine and the resultant surge in commodity prices. For India, higher prices of crude oil prices assume significance as the country imports 85% of its oil needs.
BofA Securities said it is inclined towards the scenario where Nifty ends the year at 17,000 aided by macro buffers.
The financial services firm said the index target implies a 2% upside – which is muted – but sector rotation could drive larger returns.
“We believe the presence of buffers will prevent any large macro deterioration,” said Bank of America Securities. The firm added that outflows from foreign investors could stop or possibly reverse and the focus could come back to India’s growth prospects.
BofA Securities said it is bullish on financials and industrials which are the sectors where overseas investors have cut down their ‘overweight’ positions the most since October.
The Bank Nifty index is down 9.6% since October 19, 2021, when benchmark indices last hit record highs. The Nifty is down 7.8% from that date.
It has lowered consumer staples to underweight and changed stance on healthcare and autos to overweight.
In a scenario where geopolitical events worsen and crude averages $130 per barrel in 2022, India’s gross domestic product growth may fall to 7.5%, it said.
Then, it would be bullish or overweight on IT, utilities, healthcare and telecom along with energy/metals, while being underweight or bearish on financials and industrials, and discretionary stocks.
