Domestic broking firm ICICIdirect has set Nifty target for December 2024 at 25,000 by valuing the index at 20x PE on FY26E EPS of Rs 1,250 per share with corresponding Sensex target set as 83,250.
“Corporate earnings recovery has been healthy in the recent past
with Nifty earnings growing at 22% CAGR over FY20-23. Going forward, introducing FY26E, we expect Nifty earnings to grow at a CAGR of 16.3% over FY23-26E,” ICICIdirect said.
Unlike Kotak Equities, which finds Nifty 20% overvalued, Jefferies said the Indian market appears reasonable as Nifty is now 20x 1-year forward – higher than the past 10-year average, but relative to EM (ex China) the premium at 67% is only somewhat higher than historical average.
Jefferies has given a target of 24,000 for Nifty, saying that foreign investor positioning in India is light and CY24 should see greater inflows which should help banking stocks.
“We like domestic cyclicals viz. banks, power, telecom, industrial, property. Underweight IT, Consumer, Energy. We increase underweight on consumers & raise banks overweight. Trim L&T and add Adani Ports,” Mahesh Nandurkar said in a recent note to clients.For Axis Securities, the targets are less steep at 23,000 as it sees earnings growing at 14% CAGR over FY23-26.
“We continue to believe in the long-term growth story of the Indian equity market and believe it to be well-supported by the favourable structure emerging, with increasing Capex enabling banks to improve credit growth. With current valuations offering a limited scope of further expansion, an increase in corporate earnings will be the primary driver of the market returns moving forward,” the brokerage said.
An ETMarkets poll of 23 analysts from Dalal Street shows that a majority of analysts see Nifty ending at 23,000.
While at a PE level Nifty may not be looking expensive, PB (price to book) and Buffett Indicator are telling another story. Nifty’s PB ratio at 3.2x represents a 15% premium to its historical average of 2.7x. India’s market capitalization-to-GDP ratio, also known as the Buffett Indicator, is at a high of 124%.
Citing valuations being at extraordinary levels for ordinary fundamentals, foreign brokerage UBS has given a base case target of 20,000 for Nifty.
Kotak Equities, which has been warning over signs of a bubble building in the smallcap space, is of the opinion that returns will likely be modest for the market and negative for many stocks. “A bottom-up plug-in of our 12-month face values for individual stocks shows a modest 1% upside for the Nifty-50,” it said.
Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, has also warned that in the second half of the year the equity market may reverse course and a multi-year bear market may begin as the global economy heads into a protracted recession.
“We foresee a potential 20% decline in the Indian market before the end of CY 2024. Hence, our recommendation is for investors to book profits on every rise,” says Goel.
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