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Based on FY19 and FY20 EPS estimate, the target for Nifty for March 2019 is 12,620, Shailendra Kumar, Director & CIO, Narnolia Financial Advisors said in an interview to Moneycontrol's Sunil Shankar Matkar.
In terms of risks for the market, he pointed out that the key concern is the rise in crude price accompanied by the fall in rupee. Beyond a threshold, this combination is going to push current account deficit to a point where it becomes highly inflationary for the economy and can disturb the fiscal balance.
Year-to-date Nifty has been the best performing index in the emerging market basket. If we look at the recent past of the current bull market, Nifty makes a cyclical high once it starts trading at 24 times trailing 12 quarter earnings and it makes a bottom around 18 times one year forward earning.
So, using the current consensus estimate, the immediate trading range for Nifty is 10,980-12,089. Here, it is important to know that every quarter this range needs to be adjusted mostly upward, based on reported earnings.
Presently, based on FY19 and FY20 EPS estimate, the target for Nifty for March 2019 is 12,620.
Can we call these valuations multiple overvalued depends on, whether fundamental parameters like net profit margin and asset turnover ratio are going to dip or rise from here on? And these parameters have just started inching up from multi-year lows so we can very well see Nifty trading within these valuation ranges for few more years.
A bull market ends only when valuation and fundamental parameters like NPM are all at a multi-year high. At the same time, we may witness some changes in the range due to liquidity impacting events like elections even in a structural bull market.
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