Market analysts feel that the Nifty index is all set to touch the revised 12-month target of 26,820 against the previous target of 26,398, enthused by the lofty expectations of a festival season boost, a good monsoon, and a sharp increase in government infrastructure spending.
In a recent report, Prabhudas Lilladher said it has upgraded its Nifty EPS estimates on the index space that continues to do well without rest. It is re-valuing the target upwards at 19 times of the 15-year average PE multiple and our EPS estimate of Rs. 1,411 for March 26.
At present, the Nifty is trading at 18.9 times its estimated next-year EPS, close to its 15-year average leading PE multiple of 19 times.
The bull case can see the Nifty at a target of 28,564 based on a PE of 20.2x, as mentioned in the report. On the contrary, in a bear case scenario, the Nifty may see a 10% discount to its long-term average and slip to a target of 24,407.
"The Nifty has gone up by 1.6% since July 11, though it was against the backdrop of greater volatility in the market on account of deteriorating geopolitical conditions. Indian markets have continued to be strong with healthy DII inflows even as FII inflows show a slowdown in selling activity. ".
Ongoing liquidity remains strong, with domestic inflows outpacing FII flows, thereby ensuring a stabilizing influence on the markets. Besides, there is also the increasing expectation of an interest rate cut by the Fed. Lastly, there has been a fall in wholesale and headline inflation below 4%, which may trigger a repo rate cut in H2 of FY25.
The report expects such high valuations within certain growth sectors to see a rotation into defensives such as consumer goods, durables, building material, IT services, pharmaceuticals, and telecommunications.
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