Nifty target is at 20,000 i.e. 21x PE on FY24E EPS of Rs 950: ICICI Direct

BFSI outperformance in Q2FY23 lifts overall Nifty EPS

Global markets have found comfort in recently released lower than expected inflation readings with growing expectations of a decline in pace of interest rate hikes by global central banks amid already existing growth concerns. Domestic markets have been outperforming their global counterparts and hit a 52-week high in the current week amid healthy growth prospects domestically. On the earnings side, quarterly earnings in Q2FY23 were at 9%, ahead of estimates wherein Nifty EPS came in at Rs 185/share vs. our estimate of Rs 170/share. It was up 4.5% QoQ, 2.8% YoY. The key outperformance was driven by index heavy BFSI space, especially corporate banks as well as oil & gas, pharma and capital goods domain. In the banking space, key positives were a revival in business growth (~17-18% YoY), improvement in margin (~5-25 bps QoQ) and declining NPA ratio with healthy PCR. The management commentary was upbeat across sectors more so on domestic demand prospects and recovery in margin profile amid a benign commodity price outlook and operating leverage at play. With capex cycle revival under way domestically and increasing acceptance of India as a credible, quality driven manufacturing hub (export opportunity), we stay constructive on overall markets. We believe any dips should be used to build a long term portfolio of quality companies that have lean balance sheets, are capital efficient in nature and possess growth longevity.