Benchmark Nifty has given over 10 percent returns in FY24 so far, hitting multiple new highs in June/July led by resilient domestic demand and strong FII inflows. Amid the overall positive market sentiment, brokerage house Prabhudas Lilladher has arrived at a 12-month target of 21,430 for Nifty versus 21,013 earlier. This indicates a 10 percent upside from current levels.
"India continues to be the epitome of global growth with an over 6.5 percent expected GDP growth for FY24 (highest globally) even as growth is slowing down in US and Europe is embracing recession. India has witnessed a revival in FII inflows and we expect the same to sustain. Given strong domestic growth, declining inflation, revival in industrial capex and strong Infra push by the govt, we expect sustained traction in FII inflows to continue. Further, Rural India is also showing green shoots post and soft inflation and favorable monsoons can accelerate demand further in a pre-election year," said the brokerage.
While it warned that El Nino and the 2024 elections remain key risks, it, however, added that a stable government after elections and continuation of economic policies can take markets to the next level.
Model Portfolio: The brokerage remains overweight on Auto, Banks, IT, Capital Goods and Healthcare and underweight on Metals, Cement, Consumer, Oil & Gas and Diversified Financials.
Among stocks, PL has increased weights on HDFC Bank, Tata Motors, Titan Company, Max Healthcare and L&T. It has also added Carborundum Universal and removed Jubilant Foodworks and Eicher Motors from its model portfolio.
High Conviction Picks: Among high conviction picks, Carborundum Universal, Safari, and S Chand have been added to the list. Meanwhile, it has picked Crompton Consumer and Sumitomo Chemicals as top contra bets in its conviction list.
The brokerage also removed PVR and VIP from conviction picks on the structural shift in multiplexes and market share loss for VIP and Apar post sharp run-up recently.
Earnings
For the June quarter, the brokerage estimates flat sales, 48 percent growth in EBITDA and 81 percent growth in PBT (profit before tax) for its coverage universe. Except Oil & Gas, it sees 30.6 percent growth in EBITDA and 30 percent growth in PBT.
Auto, Banks, Oil and Gas, Capital Goods and Travel will report high growth, it forecasted. Meanwhile, Consumer, Hospitals, Pharma and Telecom will report moderate growth in sales.
It also expects Auto, Travel, Pharma, Oil and Gas to report sharp margin expansion. Meanwhile, Auto, Travel, Building Materials, Capital Goods, and Durables will rank high in PBT growth, it said.
"Q1FY24 is actually the first normal quarter after Q1FY20, devoid of any COVID wave during the quarter or base quarter. The demand scenario is mixed, with some green shoots in 2-wheelers and FMCG in rural India. Urban discretionary spending shows a seasonal uptick in QSR, and strong growth in jewellery while other segments are depressed. However, travel, tourism, and spending on marriages continue to show strong growth," it noted.
It also pointed out that global commodities continue to soften as fears of recession following sharp increases in global interest rates continue to weigh on prices. The impact of softer commodities has started to reflect in price reductions selectively, added PL.
The brokerage sees a 16.3 percent EPS CAGR over FY23-25 with FY24/25 EPS of ₹1,024/1,171.