With a call for the benchmark indexes to drop 10% more by December, American firm BofA Securities warned on Thursday that investors in Indian shares may expect more suffering. By December 31, 2022, the firm forecasted that the 50-share benchmark Nifty will be at 15,600 points.

This is an increase in the target, but when compared to the brokerage's own call from June, when it anticipated the Nifty at 14,500 points. After a prolonged sell-off during which foreign portfolio investors withdrew more than USD 29 billion, it should be highlighted that the markets have recently experienced some purchasing. This is due to the resumption of foreign portfolio flows.

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In a note, its analyst said, "We remain cautious on markets on the current volatile environment and looming global recession concerns as reflected by consensus downgrading Nifty FY23/24 earnings." The brokerage acknowledged the potential for more earnings reductions but also highlighted some advantages, such as a moderating of the high cost of crude oil, the depreciation of the rupee, and domestic inflation.

BoFA positive on domestic consumption 

The firm stated that it is neutral on the information technology sector and underweight on stocks in the external/export-driven sectors like materials and select discretionary. It is "positive" on businesses in the domestic consumption and cyclical sectors, and "overweight" on businesses in the industrial, financial, auto, and staples sectors.

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When comparing its calls to consensus expectations, the brokerage stated that it anticipates financials to beat expectations because the results are backed by better asset yields and credit expansion. It cited the drag from 5G Capex plans and inflationary pressures as the reason for its call and predicted that communication services, materials, and utilities will underperform the consensus estimates in FY23/24.