The brokerage house PL Capital (Prabhudas Liladhar) reduced its 12-month Nifty 50 target by 878 points from 27,958 to 27,080 and has valued the index at 17.5x, 10% below its 15-year average P/E of 19.4x. For a bull case scenario, the 12-month Nifty target has been revised from 30,497 to 30,089 at P/E of 19.4x while the bear case scenario is of Nifty trading at 20,939 at P/E of 13.5x.
The brokerage added that it does not expect Nifty breaching its recent lows unless the geopolitical scenario deteriorates significantly. It also added that inflation could likely cross 5% over the next few months due to higher crude prices, disruption in global supply chain, El Nino (weaker monsoon and higher heat levels) and the negative base of food inflation at 36% of CPI.
A prolonged West Asia conflict could also lead to GDP forecasts in the range of 6%, higher fiscal deficit and higher interest rates by the end of 2026. Capital expenditure is expected to be sustained in defence, data centres, high speed rail corridors, renewables and manufacturing ecosystem.
The private consumption in FY27 is expected to be supported by discretionary spending. Urban consumption is likely to strengthen further while the rural demand is expected to be robust. The private sector investment is expected to be sustained by high-capacity utilization.
The brokerage is increasing weights in sectors like banks, capital goods, metals and telecom while being underweight on consumer and auto sectors due to second level impact of higher crude prices and inflation. It has added Fortis Healthcare, Kotak Mahindra Bank, CESC, Bharti Airtel and Apeejay Sunrendar Park Hotels as its conviction picks.