PL Capital also noted a pickup in infrastructure spending and project ordering, though it warned of potential volatility in FY25 due to state elections in Maharashtra, Jharkhand, and Delhi.
Brokerage house PL Capital on Wednesday projected that the National Stock Exchange (NSE) benchmark index-- Nifty 50-- could hit 27,867 levels over the next 12 months, driven by a combination of resilient sectors and cautious optimism amid geopolitical uncertainties.
At present, the Nifty 50 is hovering around 25,000 levels.
In its latest, India strategy report 'Festive Optimism Amidst Geopolitical Uncertainty', PL Capital highlighted capital goods, infrastructure, ports, hospitals, tourism, new energy, e-commerce, and telecom as sectors to watch, provided they are available at reasonable valuations.
The brokerage expects strong EBITDA or operating profit growth across hospitals, pharma, capital goods, and chemicals, with auto, banks, and consumer durables likely to post double-digit growth in the three months ended September 2024.
According to the report, the broking firm estimated that Nifty 50 could reach 27,867 levels in the next 12 months revising its previous target of 26,820 levels.
In a bull case scenario, the brokerage assumes a 5 per cent premium to the long-term average price to earnings (PE) yielding a target of 29,260 (previously 28,564).
However, in the bear case, Nifty could trade at a 10 per cent discount to its historical average, setting a downside target of 25,080 (previously 24,407).
While rural demand for staples is showing signs of recovery, prolonged monsoon rains could weigh on Q2 earnings. Discretionary spending is expected to remain healthy in travel, housing, jewellery, and two-wheelers, though passenger vehicles (PV), quick-service restaurants (QSR), apparel, footwear, and building materials may continue to face challenges, the report said.
PL Capital also noted a pickup in infrastructure spending and project ordering, though it warned of potential volatility in FY25 due to state elections in Maharashtra, Jharkhand, and Delhi.
The firm observed that valuations have shifted toward defensive sectors like FMCG, IT services, pharma, and consumer durables, which have seen a strong rebound. However, the gap in returns between large-cap and small-cap indices remains substantial over longer time horizons.