DAILY VOICE | Nifty can gain 12-14% over a year, but broader markets will do better: Vinay Agrawal of Angel Broking

Vinay Agrawal of Angel Broking expects FII flows to remain strong due to risk on the environment globally driven by continued improvement in the economic activities and increasing possibility of a vaccine by early 2021.

"India continues to remain better positioned vis-à-vis other geographies in terms of potential growth opportunities. Also low interest rate and high global liquidity will also be supportive of FII flows to emerging markets including India," he said in an interview to Moneycontrol's Sunil Shankar Matkar.

India has been consistently witnessing strong FII flows post the pandemic and has received cumulative flows of over Rs 1,50,000 crore so far in FY21.

Currently, Angel Broking is one of the largest retail brokers & amongst the top 5 in the country in terms of NSE active clients. It is present in more than 96 percent of pin codes in India.

The CEO at Angel Broking believes that the benchmark Nifty can give returns of 12-14 percent over the next one year and continue scaling new highs.

Edited Excerpts:

Q) Given the spectacular run in the last eight months taking to record highs, do you expect major sell-off in the coming days? Can we see Nifty at 15,000 and Sensex at 50,000 by next year?

With the Nifty trading at all-time highs there is bound to be some apprehension in the mind of investors. While there could be some short term volatility in the markets, we do not expect any major sell off in the markets given better-than-expected Q2FY21 numbers, continued improvement in economic activities, abundant global liquidity and encouraging developments on the vaccine front.

Therefore, we continue to remain positive on the markets from a medium to long term perspective given improving fundamentals and believe that the benchmark Nifty can give returns of 12-14 percent over the next one year and continue scaling new highs. While we expect the Nifty to do well over the next one year, we believe that broader markets will do better given continued improvement in underlying economic conditions.

Q: After more than Rs 65,317 crore of FII inflow in November so far, the highest ever monthly flow, do you expect the flow to slow down in coming days?

While FII flows for November has been the highest monthly ever flow, so far it is not a one off. India has been consistently witnessing strong FII flows post the pandemic and has received cumulative flows of over Rs 1,50,000 crore so far in FY21. Going forward we expect FII flows to remain strong due to risk on the environment globally driven by continued improvement in the economic activities and increasing possibility of a vaccine by early 2021. Moreover, India continues to remain better positioned vis-à-vis other geographies in terms of potential growth opportunities. Also low interest rate and high global liquidity will also be supportive of FII flows to emerging markets including India.

Q: What do you expect about overall earnings for the second half of FY21, and FY22, especially after better-than-expected September quarter earnings? Do you think 2HFY21 earnings are crucial to decide further trend?

We are positive on the growth prospects for the second half of the year post better-than-expected set of numbers in Q2FY21. While there was a broad beat on the Q1 numbers across sectors, management commentary on future demand outlook was also positive. High frequency indicators like PMI, auto sales and power demand also point to continued improvement in the economy so far in Q3FY21.

We believe that the second half numbers will be important for the markets given that they are factoring in strong earnings revival in FY22. Better-than-expected second half numbers will lead to earnings upgrades for FY22 which will be positive for the markets.

Q: Do you think it is still a buy on dip market and why?

While Nifty valuations at around 19.5x FY22 consensus EPS estimates are not cheap, we are in the early stages of an economic recovery where multiples tend to be higher. There has also been a marked acceleration in economic activities from October driven by festive demand and opening up of the services sector, which bodes well for second half earnings and justifies the premium valuations.

Therefore, we believe that the premium valuations are likely to sustain going forward given increasing visibility on earnings growth and abundant global liquidity. We maintain our positive view on the markets from a medium to long term prospective and believe that this continues to remain a buy on dip market. Corrections if any would be intermittent and should be used to increase equity allocation from a long term perspective.

Q: Do you expect the broking industry to continue to report a strong set of numbers on the basis of addition of clients and volumes?

Broking industry has seen a significant growth in terms of volumes & participation since the last 3 quarters. Higher section of millennials are entering the capital markets citing a good investment opportunity. Cash market volumes have touched around Rs 60,000 crore now, compared to around around Rs 40,000 crore back in February, almost a 50 percent jump while F&O volumes have more than doubled to around Rs 26 lakh crore now from around Rs 11 lakh crore in March. It is also evident from the fact that industry has already added around 68 lakh new demat accounts in seven-month of FY21 compared to around 50 lakh in entire FY20.

In terms of participation, NSE has already added around 40 lakh active clients in seven-month of FY21 compared to around 20 lakh in entire FY20. Looking at this growth, we feel that this increased participation is here to stay since more retail population is inclined towards capital markets through direct equity or MF route, against the conventional investments products like FDs, RDs & insurance products. Moreover, if we see the rebound in Nifty from the levels of 7,500 in March, to now touching 13,000, it is an optimistic picture from an investment point of view. With these opportunities coupled with smartphone penetration and digital broking platforms, we see a healthy engagement of the retail population especially from tier 2 & tier 3 cities.

Q: What are your future plans with respect to Angel Broking and where do you see the company five years down the line concerning growth?

Currently, Angel Broking is one of the largest retail brokers & amongst the top 5 in the country in terms of NSE active clients. Our digital first strategy has yielded retail equity market share gains for us which is on a growing trajectory, at around 12 percent+. We are present in more than 96 percent of pin codes in India. We believe that with our complete suite of digital broking products, we are able to provide customers a seamless experience and that too at simplified pricing. Also, with the advent of AI & ML, we have been able to engage & service our clients based on their needs. Thus, our vision is to be the first-choice digital broking platform for all the retail participants across the country.