HSBC: maintains Sensex target of 90,520 by 2025, sees risk in high valuations
HSBC remained bullish on India’s long-term growth, maintaining a Sensex target of 90,520 by 2025, indicating a 15% upside. The brokerage pointed to India’s impressive earnings growth of 25% annually since 2020 as a key driver of optimism. However, HSBC also flagged high valuations in large-cap stocks as a potential risk to the market’s near-term performance.
Recent macro indicators, including GST collections, auto sales, and PMI data, have shown signs of weakening, leading to earnings downgrades for over 60% of listed companies since September.
Despite this, HSBC remains optimistic about small and mid-cap companies, which are expected to see 30% EPS growth, far outpacing large-cap companies that are projected to grow by only 12%.Axis Bank and KIMS are among HSBC’s top picks, benefiting from India’s infrastructure and healthcare growth. Despite the slowdown in large-cap earnings, HSBC believes domestic retail and institutional flows will support the market, balancing out risks from foreign outflows.
Goldman Sachs: near-term neutral, sets Nifty target of 27,000 by 2025
Goldman Sachs takes a neutral stance on Indian equities in the near term, with a Nifty target of 27,000 by end-2025, implying a 15% upside. The brokerage sees mid-teen earnings growth driving returns, though the next three months are expected to remain range-bound. Goldman Sachs has set a three-month Nifty target of 24,000, indicating short-term caution.Indian equities have de-rated by 8% since the recent correction, but Goldman Sachs notes that the market is still trading at elevated valuations of 23x forward P/E, above the 10-year historical average. The brokerage expects earnings growth of 13% and 16% for CY2025 and CY2026, respectively, slightly below consensus expectations.
Goldman Sachs identifies quality stocks with strong balance sheets, high return on equity (ROE), and positive EPS revisions as key picks for investors. Sectors such as autos, telecom, realty, and exporters are favored, while IT and pharma have been upgraded to overweight. Goldman also sees a gradual recovery in consumption and capex, which will drive longer-term growth, despite potential risks from high valuations and weaker FII flows.
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Citi: upgrades cement sector to overweight, sees 7% upside for Nifty by September 2025
Citi has upgraded the cement sector to overweight, following a recent 10% correction in the Nifty, which has brought valuations closer to their long-term average. The brokerage sees Ramco Cement as a prime pick for its mid-cap portfolio, replacing Devyani International, signaling a shift towards infrastructure-linked sectors.
The brokerage believes that despite the market’s recent pullback, valuations now offer more attractive entry points for long-term investors. The correction has created a more balanced market, with the one-year forward P/E ratio just slightly above the five-year average.
Citi remains overweight on financials, telecom, and pharma, sectors that have shown resilience despite weaker consumer demand. Public capital expenditure and rural demand recovery in the second half of FY24 could drive growth in these sectors. However, FII outflows remain a key risk, with continued foreign selling possibly challenging market stability.
Citi’s Nifty target for September 2025 is 25,000, reflecting a 7% potential upside, as the brokerage sees underlying growth drivers in the economy that could support a gradual recovery.
CLSA: predicts 5-7% ‘Santa Claus’ rally in December, banks to lead
CLSA has forecasted a 5-7% “Santa Claus” rally in Indian markets over the next 6-8 weeks, driven by seasonal trends and market sentiment stabilization. Vikash Kumar Jain, India strategist at CLSA, notes that the December rally has occurred in 75% of the years over the past three decades, with a median return of 2-3% in the month.
Jain points out that most of the recent negative factors — including FII selling, geopolitical tensions, and disappointing Q2 earnings — have already been priced into the market. As sentiment cools, he anticipates an interim relief rally in the coming weeks.
Banks are expected to lead the rally, benefiting from rising bond yields which support lenders’ margins. Jain emphasizes that the banking sector’s valuations remain reasonable, making it an attractive sector to watch. However, CLSA remains cautious about global FII flows and their continued impact on India’s equity market, particularly as sentiment towards emerging markets fluctuates.
Market outlook: volatility now, long-term opportunities ahead
The recent pullback in the Sensex highlights immediate challenges such as FII outflows, geopolitical tensions, and high valuations. However, brokerages are unanimous in their belief that India’s structural growth story remains intact, with strong domestic growth drivers such as rural demand, infrastructure investment, and consumption recovery.
Investors are advised to remain selective, focusing on resilient sectors like financials, IT, and infrastructure, while keeping an eye on risks from global macroeconomic trends. As brokerages forecast back-loaded returns, with opportunities in quality stocks and sectoral leadership, the outlook remains positive for long-term investors willing to navigate short-term volatility.
Benchmark BSE Sensex closed 1,961.32 points, or 2.54%, higher at 79,117.11 on Friday. Meanwhile, the broader Nifty50 reclaimed the 23,900 mark, rebounding from five-month lows hit in the previous session. The Sensex hit a record peak of 85,978.25 on September 27, with the Nifty reaching a lifetime high of 26,277.35 on the same day.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)