Inflation and 3rd COVID wave will drive Nifty 16,300-16,800

A similar performance likely in H2CY21?

The bull market run is expected to continue but a similar performance is unlikely to be seen in the second half of CY21. The reason is that the market seems to have priced in the expected earnings and economic recovery with the easing of restrictions across the nation, experts feel. While the benchmark indices, with intermittent consolidation and corrections, can rally another 4-7 percent, the outperformance in the broader markets is expected to continue, say experts.

“Our year-end target for the Nifty is 16,300. We expect the market to get into some kind of consolidation zone during the remaining months of 2021. The market will be confident about the earnings growth, post the festive season this year,” Vineeta Sharma, Head of Research, Narnolia Financial Advisors, told Moneycontrol.

“The trajectory for the interest rate in India and across the globe, too, would be known by then. Also, we will have more clarity on supply-chain disruption related to global inflation by the end of the year," he said.

“So by the end of 2021, most of the major uncertainties would be over creating a base for the market for strong gains during 2022-23,” he added.

Gaurav Garg, Head of Research, CapitalVia Global Research, feels the Nifty50 can hit 16,800 and BSE Sensex 55,750 in the second half of CY21.

He believes the market to be more in the consolidation range with an upside bias in the remaining part of this calendar year. “It still remains a ‘buy-on-dip’ kind of market. Better South-west monsoon, along with the festive season, will give a good cheer to the market,” he said.

Will inflation, third wave of COVID impact Street?

Everything is favourable for the market now, but any spike in inflation and a possible third COVID wave could spoil the rally, going ahead, though experts feel India is better prepared to deal with the third wave, given the momentum in the vaccination drive.

“Currently, India is in a bull run, with FPIs diverting funds towards its economic growth and future vision. As the overall sentiment translates towards normalisation, the markets will factor in further growth. These factors give further headroom for the benchmark indices to touch the 16,500-16,700 levels this fiscal. But the journey up won’t be a smooth ride. There will be corrections due to inflation fears and the RBI stance on interest rates," said Nirali Shah, Head of Equity Research, Samco Securities.

She further said going forward, as the inoculation drive picks up and state governments continue their efforts to avert another medical crisis, the second half looks like a slow and steady ride upwards. Inflation fears would be the party-pooper but with growing demand and strong fiscal measures by the Centre to stimulate economic activity, H2’s narrative will continue to remain polarised, she added.

Garg, too, feels the same. Inflation and any impact of the third wave of COVID-19 can play spoilsport, he said.