How much time will Nifty take to hit 20,000?

We do not think that interest rates have peaked. The US Federal Reserve reinforced its inflation fight by raising its key interest rate this year for the seventh time and signaling more hikes. But the Fed announced a smaller hike than it had in its past four meetings at a time when inflation is showing signs of easing. The US Fed boosted its benchmark rate a half-point to a range of 4.25% to 4.5% – its highest level in 15 years. The policymakers also forecast that their key short-term rate will reach a range of 5%-5.25% by the end of 2023.

That means, any rise in Nifty will have to be on the back of earnings growth, so it all boils down to earnings growth for individual Nifty components.

According to our estimates, Nifty aggregate earnings are expected to grow in FY24 to about ₹990 per share. If the expected economic growth is achieved owing to economic reforms and structural advantages accorded by India’s demography, we expect Nifty can scale 20,000 levels in the second half of the next calendar year when global markets recover.

If developed economies plunged into deep and broad-based recession or the domestic economy doesn’t grow as envisaged, this number can come up shorter than current expectations. India exports 20% of its output. India’s equity market returns are also co-related with the world and hence severe fall in global share prices may be a headwind for Indian stocks. In that scenario, it will be difficult for Nifty to rise towards 20,000.

Devarsh Vakil is deputy head of retail research at HDFC Securities

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