Domestic equity benchmark Nifty is expected to scale up to 25,810 level by December 2024, says brokerage firm Prabhudas Lilladher (PL) in its latest India Strategy Report – Democratic Hat-trick to Re-Rate Markets. The upward mobility in Nifty is attributed to the continuation of the National Democratic Alliance (NDA) government after the Lok Sabha Elections 2024 and La Nina-led normal monsoons, which are expected to provide stability in policies and boost demand economic growth.
As per the report, Nifty is currently trading at 18.3x 1-year forward earnings per share (EPS), which is at 3.7% discount to 15-year average of 19x. In the base case, the benchmark index is projected to reach 25,810 level, while it is expected to hit 27,100 mark in bull case and 23,229 in bear case.
“On the base case, PL values Nifty at a 15-year average PE (19x) with March26 EPS of 1,358 and arrive at 12-month target of 25,810 (25,363 based on 18.9x Dec 25 EPS of Rs1342 earlier). Bull Case, PL values Nifty at 5% premium to 15-year average PE 20x (6% premium earlier) and arrive at bull case target of 27100 (26885 earlier). Bear case, Nifty can trade at 10% discount to LPA with a target of 23229 (22066 earlier),” the report highlights.
Recently, NSE's benchmark index Nifty touched its fresh all-time high of 22,775 on April 10, rising nearly 28% from its 52-week low of 17,814 hit on April 26, 2023. In the past six months, the benchmark has surged around 20%, while it climbed nearly 4% in the calendar year 2024. The index crossed the significant 20,000-mark for the first time on September 11, 2023.
Amnish Aggarwal, Head of Institutional Research, Prabhudas Lilladher says, “Recently, the Nifty reached its all-time peak, but subsequently experienced a correction of around 4% attributed to escalating geopolitical tensions, fluctuations in crude oil and commodity prices, and differing perspectives on the anticipated interest rate adjustments by the U.S. Federal Reserve.”
“Concurrently, India is immersed in the General Elections, a pivotal event of this decade. Despite opinion polls forecasting a comfortable victory for the NDA, the markets are not ready for a repeat of the 2004 election outcome, where the BSE Sensex plummeted by 15.5% on May 17, 2004, the day election results were announced,” he says.
Aggarwal further says that the beginning of June is expected to be a crucial turning point as uncertainty around political front and monsoons will be over, which can significantly increase FII inflows. “We advise buying during market dips in the run-up to June 4 2024.”
As per Prabhudas Lilladher’s analysis, the economy and markets have done well under both NDA and UPA (INDIA) given strong tailwinds of demographics. However, NDA scores in implementing key reforms and its focus on Infra development and inclusive growth across sections and regions. BJP Manifesto is providing more clarity on the economic path with focus on building world class infra and investing in technology transition which is sweeping the universe at the expense of freebies, it adds.
Over the last three months, the top-performing sectors have been Auto, Metals, Power, and Oil and Gas, while defensive sectors like IT services, FMCG, Banks, and consumer durables have lagged behind. Realty, Healthcare, and Capital Goods have maintained their positive momentum. A shift in this trend appears improbable in the short term, the brokerage firm says in its report.
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