The Indian market is facing headwinds like elevated crude prices and interest rate hikes, and the global market uncertainty will mean that volatility on Dalal Street will only pick up, according to Amish Shah of BofA Securities.

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BofA Securities has thus scaled back its Nifty near-term target from 16,000 to 14,500. It expects the market to bottom out by August-September on potential clarity on macros like the US and India monetary policy outlook.

“A combination of valuation correction, as well as earnings contraction will mean markets will head down lower. We have been cautious about markets since the start of this year. The Ukraine conflict only made us more cautious. Recently we have taken our Nifty target down further. So, I am definitely in the camp of being more cautious at this point,” said Shah.

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The brokerage is underweight on sectors such as consumer discretionary, IT, cement, steel and telecom.

“We are more cautious on consumer discretionary, IT steel, cement, and telecom as well. So, these are sectors where we are most cautious. Given that I am cautious about markets, we are currently overweight on most defensive sectors," said Shah.

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On the positive side, BofA Securities is overweight on financials and staples and they are bullish on auto stocks as the current valuations look attractive and the sector has a pent-up demand, which should act as a tailwind.

Within autos, two-wheelers could get a tailwind as the rural economy is recovering. The firm has Mahindra and Mahindra and Eicher as top picks.

Along with autos, BofA Securities is also positive on cement stocks like UltraTech Cement. It is also bullish on select pharma and realty stocks like Sun Pharma, Biocon, and Macrotech Developers.

For the full discussion, watch the video.

(Edited by : Abhishek Jha)

First Published:Jun 28, 2022 10:55 AM IST