Nomura predicts 12% increase in Nifty this year; what will drive the rally?

livemint.com:

MobiKwik IPO: 7 crucial things to know from DRHP Nevertheless, India faces substantial risks in the form of prolonged elevated commodity or oil prices and unfavorable election results. On a global scale, the potential scenarios of either a scenario with no economic downturn (characterized by robust growth, persistent inflation, and higher yields) or a hard landing (marked by sharp declines in growth, inflation, and yields) may lead to increased risk premiums and diminished valuations.

"Globally, the scenarios of no landing (strong growth, sticky inflation and higher yields) and a hard landing (sharp fall in growth, inflation, yields) could lead to higher risk premium and lower valuation. Such a correction would be a buying opportunity, in our view, particularly if a growth slowdown or recession in the US is a clearing event, reducing macro uncertainties.

This could set the stage for a revival in mass consumption and private capex, in our view," it said. Also read: SEBI permits short-selling across all categories, F&O stocks also eligible Nomura considers such corrections as favorable buying opportunities, particularly if a slowdown or recession in the United States resolves macroeconomic uncertainties, potentially triggering a resurgence in mass consumption and private investment.

Nomura projects a robust 20 percent Compound Annual Growth Rate (CAGR) in corporate earnings for Nifty 100 from FY19 to FY24, marking a substantial increase compared to the mid-to-high single-digit growth witnessed in FY15-20. The ratio of corporate earnings to GDP, which experienced a decline after the Global Financial Crisis (GFC), rebounded to 8.8 percent in FY23, recovering from a low of 4.6 percent in FY18.