Nifty 50 Target at 25,816; Indian Stock Market Set for a Bullish Run, Says Prabhudas Lilladher

With major indices like the Sensex and Nifty 50 getting close to all-time highs, the Indian stock market is poised for a bright future. This optimistic prognosis follows a time of elevated volatility that coincided with the outcomes of the 2024 Lok Sabha election and large sell-offs by foreign investors. Strong domestic purchasing through systematic investment plans (SIPs) effectively offset the significant outflow of funds from foreign institutional investors (FIIs), reducing the overall impact.

Analysts are cautiously optimistic now that the election-related issues have been overcome and the National Democratic Alliance (NDA) government has garnered support from about 300 members of Parliament. It will be vital to see how Prime Minister Narendra Modi and the Bharatiya Janata Party (BJP) handle an alliance government. Key ministries remaining in place is viewed as an indication of market stability.

The NDA government is expected to maintain its emphasis on capital expenditure-led growth in sectors like the Production Linked Incentive (PLI) scheme and infrastructure development in the domains of roads, ports, aviation, defense, railways, and green energy, according to Amnish Aggarwal, Director of Research at Prabhudas Lilladher. This view is further supported by factors like normal monsoon forecasts, a 20 basis point reduction in the fiscal deficit for FY24, and a ₹2.1 lakh crore dividend from the Reserve Bank of India (RBI). To combat the consequences of social engineering and recent political defeats in several states, Aggarwal anticipates a stronger focus on addressing the needs of farmers, the impoverished in both rural and urban areas, and the middle class.

Aggarwal maintains his optimism for the auto, banking, capital goods, defense, healthcare, pharmaceutical, cement, aviation, and discretionary consumer sectors. According to him, positive monsoon conditions, a progressive Union Budget, and robust capital inflows will all contribute to the improvement of market confidence.

While telecom and the oil and gas sectors underperformed in sales during the fourth quarter of FY24, industries including travel, chemicals, housing finance companies (HFCs), and media exceeded forecasts. The industries with the largest growth in profits before interest, taxes, depreciation, and amortization (EBITDA) were banking, capital goods, cement, chemical, and media; the consumer, telecom, and building materials sectors underperformed. The cement, capital goods, chemicals, oil and gas, and travel sectors led in terms of profit before tax (PBT), while the media, metals, and consumer sectors had notable misses.

The Nifty is valued at its 15-year average price-to-earnings (PE) ratio of 19.2x in Prabhudas Lilladher’s base case scenario, with an estimated ₹1,344 in earnings per share (EPS) for March 2026. As a result, the 12-month target was raised from 25,810 to 25,816, as a result. The Nifty is valued at a 5% premium to its 15-year average PE (20.2x) in a bullish scenario, which results in a goal of 27,102, which has been slightly modified from 27,100. On the other hand, a bearish scenario would see the Nifty trading at a 10% discount to its long-term average, with 23,235 as the target.

Reducing weights in Hindustan Unilever, Titan Company, Infosys, and Bajaj Finance and raising allocations to HDFC Bank, Larsen & Toubro, InterGlobe Aviation, Sun Pharmaceutical Industries, LTI Mindtree, Reliance Industries, and Bharti Airtel are among the model portfolio revisions made by the firm. Delhivery has been replaced in the portfolio by Ambuja Cements.

Furthermore, BEML and ITC have been added to the list of high conviction picks; Safari Industries, Navneet Education, and Grindwell Norton have been eliminated. The brokerage is still underweight in the IT, metals, diversified financials, and oil and gas sectors and overweight in the auto, banking, capital goods, consumer, healthcare, and telecom sectors. The company has taken an equal weight position in the cement industry.