Nifty @ 20,000 by March 2022?

Introduction:

The Benchmark Index Nifty 50 has got more than doubled from the low levels in March 2020. This Journey of Nifty 50 from the low level of 7,610.25 on March 23, 2020, to all-time high levels of 17,947.65 on September 24, 2021

Changes & Journey of Nifty 50:

• Since 31^st March 2021, Nifty 50 has started considering the Consolidated Earnings Per Share (EPS) of the companies against the Standalone EPS of the companies earlier. Due to this reason, the Nifty PE Ratio was above 40 on March 30, 2020, but on 31^st March 2021, that Nifty PE Ratio went down to 33.
• On 1^st April 2021, Nifty 50 was at the level of 14,867 and its PE Ratio was 33.60. Hence the EPS Recorded that day was 442.47. As of now, the Nifty 50 is at 17,855 on 27^th September 2021 and its PE Ratio stands at 27.33, which has led to substantial improvement in EPS of the Nifty to 653.31.
• This growth in the Nifty EPS from 442.47 to 653.31 amounts to a growth of 47.65% that too in just 1 Quarter.
• The reason behind this growth in EPS was due to the low base effect as there was a total lockdown in the country of 45 to 50 days in the first quarter of FY21 i.e., April 2020 to June 2020.

Will Nifty touch the mark of 20,000?

• At the current EPS of Nifty which is 653 and if the market currently trades at the present PE Ratio, then if the annualized PE touches 750, Nifty Index can cross the mark of 20,000.
• With the current market rally, this target seems to be achievable, but there can be many hindrances in between in the form of changing market sentiments, any major events, or other possible performance affecting reasons.
• Since, now Nifty is considering the Consolidated Earnings of the corporates, the target of 20,000 looks to be achievable from a numbers point of view.

Conclusion:

It will be an interesting thing to watch that whether Nifty will touch the mark of 20,000 with the availability of certain boosting factors like increasing earnings, revenge spending, and other supportive factors. Also, one should be watchful for the upcoming quarterly results of the company as the base effect of the last financial year quarters were strong especially of Q3FY21 & Q4FY21. Do follow a staggered manner of investing and should avoid lumpsum investment at this point. Do consult a financial advisor before making investment decisions.