Brokerage firm Prabhudas Lilladher has raised its 12-month forward target for the benchmark Nifty to 26,398 from 25,816, as compared to a month ago.
“In the Base Case,PL values NIFTY at 3% discount to 15-year average PE (18.6x) with March 26 EPS of 1,417 and arrives at a 12-month target of 26,398 (previously 25,816). In the Bull Case, PL values NIFTY at 5% premium to 15-year average PE 20x and arrives at a bull case target of 28,575 (previously 27,102). In Bear case, Nifty can trade at 10% discount to LPA with a target of 24,493 (previously 23,235),” the firm said.
The brokerage highlights several favorable factors, including a normal monsoon and stable global commodity prices, which are expected to curb inflation and bolster rural demand. Additionally, there is anticipation of interest rate reductions later this year.
Looking ahead to the upcoming budget, PL anticipates that the government will prioritize infrastructure and capital expenditure, rural development, and support for the lower-income segment to provide additional stimulus to the economy.
PL predicts that several sectors will perform strongly, including capital goods, infrastructure, logistics/ports, EMS (Electronic Manufacturing Services), hospitals, tourism, auto, new energy, e-commerce, and telecom. The expectation of normal monsoons and potential concessions for rural and middle-class segments is anticipated to rejuvenate demand in FMCG, durables, auto, retail, and building materials sectors.
“Markets are eagerly anticipating the first budget of Modi 3.0 in an environment of a strong economy and healthy fiscal condition, bolstered by a ₹2.1 trillion RBI dividend cushion and normal monsoons. Prabhudas Lilladher expects the government to renew its focus on infrastructure and capital expenditure, rural development, and support for the lower-income segment, along with some concessions for the tax-paying class, all of which could further stimulate the economy,” the report said.
Q1 FY25 results and union budget
The brokerage firm estimates a 4.7 per cent growth in sales, along with a 2.8 per cent decline in EBITDA and a 4.9 per cent decrease in PBT across its coverage universe. Excluding Oil & Gas, PL forecasts a 7.5 per cent increase in EBITDA and a 7.3 per cent rise in PBT. Sectors such as Auto, Capital Goods, Hospitals, AMCs, and Durables are anticipated to drive PBT growth. Conversely, Oil and Gas are expected to see a decline in EBITDA, while Banks, Cement, Chemicals, Consumer, IT, and Telecom are likely to show modest growth.
The fiscal outlook for FY24 appears robust, supported by strong tax and non-tax revenues, and reduced revenue expenditure, resulting in a 9 per cent reduction in the revenue deficit and a 4.6 per cent decrease in the fiscal deficit, which now stands at 5.6 per cent of GDP, it said.
PL believes that the fiscal trajectory remains on course, bolstered by an increased RBI dividend of ₹2.1 trillion, providing additional room for the government to accelerate infrastructure and capital expenditure plans, enhance welfare initiatives for the public, foster job creation, and offer incentives to taxpayers.
