Prabhudas Lilladher cuts Nifty target to 27,381, suggests buying on dips for long-term gains
Prabhudas Lilladher in its latest India Strategy Report while slashing its base case target for Nifty to 27,381 (27,867 earlier), recommending selective buying on dips for long-term gains.
The domestic brokerage values Nifty at a 15-year average PE (19.1x) with Sept 26 EPS of 1,434 and arrives at a 12-month target of 27,381 (27,867 earlier), while in a bull case scenario, it values Nifty at PE of 20.1x and arrives at a bull case target of 28,750 from an earlier 29,260.
The benchmark index has been down 6% since October 12 — an apparent impact of Rs 72,000 crore FII selling amid Donald Trump’s victory in the US presidential election, sustained geopolitical uncertainty, strength of USD and softening of gold prices.
“Demand conditions remain mixed with a steady uptick in rural demand given low base and normal monsoons. However, rising inflation is affecting demand in urban India (yet to play out fully), more so in metros and big cities, which account for ~35% of the total demand in the economy. All hopes now rest on the demand surge in festival and wedding season,” stated the report.
PL Capital expects an interest rate cut only after budget as the spike in food inflation to 10.9% (CPI increase to 6.2%) takes it much above the comfort level of the RBI. The broking firm suggests a stock-specific approach given the tepid demand scenario. PL Capital believes capital goods, infra, EMS, hospitals, pharma, tourism, auto, new energy, e-com, jewellery are good themes to play at current valuations.
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