Nifty May Scale Over 20,000 By End Of September, Says JM Financial's Rahul Sharma

India's benchmark Nifty 50 may scale 20,000 by September-end on buying from overseas investors, according to JM Financial Ltd.'s Rahul Sharma.

Foreign institutional investors, who hold around 30,000 short contracts and index futures, are now positive, Sharma, director at JM Financial, told BQ Prime.

"This week, 19,600 seems like a very high possibility [for Nifty 50]. Once we cross 19,600, I think the next stops will be directly at 20,000 and above that at 20,400," Sharma said. The benchmark Nifty 50 closed 0.48% higher at 19,528.80 on Monday.

Information technology, public sector undertakings, metals, and chemical stocks remain among the preferred picks for the brokerage and are expected to lead this rally.

Among information-technology stocks, Tata Consultancy Services Ltd. and Infosys Ltd. could surprise with a 10% upside, while GAIL Ltd. and ONGC Ltd. are expected to be the highest performers among PSUs and may rise as much as 25% during the month, Sharma said.

In the banking and financial services sector, the brokerage expects public sector entities to outperform their private sector counterparts, with good returns expected from Federal Bank Ltd., which came out of nine months of consolidation, according to Sharma, and could give a 20% return within the month. State Bank of India, Bank of Baroda, and Canara Bank are also expected to give good returns in the public sector banking domain. Among private banks, HDFC Bank Ltd. may bounce back by as much as 5%.

Metal stocks, which have held on well despite market volatility and uncertainties from China, are expected to continue the bullish trend, Sharma said. While at the current levels, the risk-reward ratio may not be exactly favourable, Sharma remains bullish on Tata Steel Ltd. and Hindalco Industries Ltd. Any dip in the stock would be a good point for entering long positions, he said.

The brokerage is also positive on chemicals and expects a 15–25% upside as the stocks in this space are moving out of the correction phase that lasted 12 months. 

Small-cap and mid-cap stocks, which have provided lucrative opportunities to make returns, especially during the last three months, may see a pullback, according to Sharma. It would be correct to book profits now in the small- and mid-cap segments, while investing in large-cap stocks, he said.

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