Nifty 50 year-end target to 27,381 amid ongoing market correction: Prabhudas Lilladher

Amid a persistent stock market correction, domestic brokerage Prabhudas Lilladher has revised its year-end target for the Nifty 50 index down to 27,381, reflecting a 1.7% cut from the earlier forecast of 27,867. This adjustment is based on a reduction in the Nifty’s earnings projections for FY25/26/27 by 0.5%, 2.0%, and 1.5%, respectively.

Despite this downward revision, analysts suggest taking a selective buying approach for long-term gains, advising investors to "buy on dips" as they navigate the current market conditions.

The report highlights mixed demand conditions, with rural demand showing a steady increase thanks to a favorable monsoon season and a low base effect. However, rising inflation is impacting urban demand, particularly in large cities, which contribute to about 35% of total demand in the economy. The upcoming festival and wedding season could play a critical role in driving demand in the near term.

Prabhudas Lilladher also anticipates that the Reserve Bank of India (RBI) will only consider an interest rate cut after the national budget, as food inflation has surged to 10.9%, pushing the Consumer Price Index (CPI) to 6.2%, which is above the RBI’s comfort zone. The brokerage firm suggests a stock-specific approach, given the subdued demand environment.

The Nifty 50 has dropped 6% since October 12, influenced by factors such as ₹72,000 crore in Foreign Institutional Investor (FII) selling, Donald Trump’s U.S. presidential election victory, geopolitical tensions, a strong U.S. dollar, and softening gold prices.

However, Prabhudas Lilladher identifies three key factors that could support future growth:

The results of recent state and by-elections in Maharashtra, Haryana, Uttar Pradesh, and Bihar, which have bolstered the position of the ruling NDA government, potentially providing stability and momentum for reforms.

PL Capital recommends focusing on sectors such as Capital Goods, Infrastructure, EMS, Hospitals, Pharmaceuticals, Tourism, Auto, New Energy, E-commerce, and Jewelry, which are expected to perform well at current valuations.