Nifty seen near 21,000 as InCred's bear case shows growth challenges persist

InCred said the high-frequency data improvement that was seen in the Index of Industrial Production (IIP), vehicle sales and consumer sentiment till November last year has started to fizzle out.

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26 Aug, 2025 12:21

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InCred Capital has lowered its year-end Nifty 50 target by 8% and projects a bear case scenario of the index hitting a level of 21,016 by the end of FY26, based on a range of factors, both domestic and global.

The brokerage said it has lowered the index target keeping in mind the challenges to the growth momentum, which have been visible for a few months, and said the index is expected to be sideways to lower in the near future.

Bear Case Scenario

"Considering the Nifty 50 EPS cut of 1.5% in recent weeks and factoring in the slower-than-expected economic recovery in our probabilities, we have cut blended Nifty 50 target by 8% to 23,260, Our bear-case Nifty-50 target of 21,016 shows a 9% downside," said the InCred note dated January 21.

"There is a 40% probability of hitting the bear case Nifty 50 target of 21,016 as against the base case of 50% for FY26," InCred said, increasing the likelihood of its worst-case projection from an earlier 35% probability. The note added that the market volatility has been a major factor in influencing their bull/bear case projections, though InCred is hopeful of a bounce back, according to Pramod Amthe, InCred Capital's Head - Institutional Equity Research.

InCred's assumption factor in two key negatives, one being crude oil prices which it sees inching higher in a bear case, with the GDP languishing near the 6% mark next fiscal in a worst-case scenario.

Challenges to Growth

InCred said the high-frequency data improvement that was seen in the Index of Industrial Production (IIP), vehicle sales and consumer sentiment till November last year has started to fizzle out. The Dec 2024 data on GST collections, rising channel inventory and credit growth sluggishness is pointing to challenges in growth.

InCred hoped that the upcoming Union budget provides 'hope' to reverse this trend through income-tax rate cuts, as the consumption sentiment and demand seen during the festive season has started easing.

Read More: Nifty Smallcap 100 index extends monthly fall to worst since March 2020

Spaces to Watch

"The market in a correction phase hence negative news is seeing sharper reactions, as the worst is getting discounted in a very short time frame," Amthe said on CNBC-TV18 during an interaction.

In this weak market, InCred has been finding value in IT and Pharma stocks, and said they will buy them even during declines. "We have been upgrading pharma stocks in the last six months, including Laurus, and the results in the sector have been good," Pramod Amthe added. "Rupee depreciation is the trade to look at, and we prefer IT and Pharma, despite short-term challenges in term of US policy action," said Amthe.

Other notable stocks include Deepak Fertilizer which InCred has recommended to add, while Exide has been removed from their high-conviction list over underperformance. The Buy on Deepak Fertilizer was initiated last month on the bet that the capacity expansion should play out going forward. On Exide Industries, InCred said investors are getting 'realistic' about the pace of EV battery ramp up plans, leading to its removal from the conviction list.

Among spaces, InCred said it is bullish on cement, where the worst seems to be priced in, and is positive on the EMS players. The other Overweights by InCred are Aluminium, Financial Services, Capital Goods, Consumer Electronics, and Oil & Gas.

Earnings Comfort - Not There yet

InCred also said that while the forward P/E valuation has eased to the 10-year mean, which provides comfort, the downward EPS revision trend is 'yet to fully bottom out'. The sectors that are expected to play the laggard are likely to be metals, chemicals, consumer staples, banks and oil & gas.

Read More: Week Ahead - Budget, Earnings, FOMC meet, US GDP among factors to watch

"With the earnings growth rate risk playing out, we feel the value investing style provides valuation comfort and also limits stock price downsides, which may be a better-yielding strategy than the growth investing style in the last few years," said the report.

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