India's stock markets have seen a lot of volatility in the last few weeks. With geopolitical tensions in West Asia escalating and China rolling out several stimulus measures to lift the economy, foreign institutional investors have pulled out massive amounts of money from Indian equity markets over the past month. In this backdrop, benchmark indices have come off a fair bit from their lifetime highs.
The BSE Sensex fell to 81,501.36 when markets closed on October 16, slipping 5.2 per cent from its record high of 85,978.25 on September 27. The NSE Nifty 50 index was also down 5 per cent to 24,971.30 from a high of 26,277.35.
On Thursday, October 17, markets gave up initial gains and were trading flat to negative in the morning session. Foreign portfolio investors pulled out more than Rs 67,000 crore from India's equity market so far in October—the most they have pulled out for any month in 2024. This has been partly cushioned by strong inflows from domestic investors.
Stock broking firm Prabhudas Lilladher remained upbeat on the markets recovering, revising its 12-month target for the Nifty. It now sees the Nifty 50 touching 27,867 over the next 12 months in its base case, versus its earlier target of 26,820. The latest target is an 11.6 per cent upside from its Wednesday's close.
In a bullish scenario, the Nifty could touch 29,260 while in a bear case, it could touch 25,080 levels, estimated Prabhudas Lilladher.
"PL Capital believes that the market and street estimates are already priced in a strong demand rebound during the upcoming festival and wedding seasons, and any disappointment in demand during this period could lead to further downward revisions in EPS (earnings per share) estimates," it said.
Prabhudas Lilladher revised its EPS estimates for Nifty 50 by 3.8 per cent for the current financial year ending March 2025 and by 2.8 per cent for the 2025–26 financial year.
Capital Goods, infrastructure, ports, hospitals, tourism, new energy, e-commerce, and telecom are emerging sectors to watch out, provided they are available at the right valuations, it said.
Prabhudas Lilladher expects strong EBITDA (earnings before interest, taxes, depreciation, and amortization) growth to continue in the hospitals, pharma, capital goods, and chemicals sectors.
Rural demand for staples is also showing signs of recovery, though the September quarter results may reflect some impact from prolonged rains, it feels. Discretionary spending remains positive in areas like travel, housing, jewellery, and two-wheelers, while passenger vehicles, quick-service restaurants (QSR), apparel, footwear, and building materials are still facing challenges, it added.
Infrastructure spending also picked up, but might remain volatile in the wake of various state elections, according to Prabhudas Lilladher.
"The market has shifted in favour of defensive sectors as the valuations in many cyclicals have become quite expensive, even after accounting for sustained growth. With expectations of higher growth and lower risk, sectors like FMCG, IT services, pharma, and consumer durables have experienced a strong rebound," the broking firm noted.