Nomura forecasts a modest 4% upmove in Nifty 50 by year-end

The Nifty 50 has corrected 16% from September 2024 in dollar terms, while smallcaps and midcaps have lost 23% and 21%, respectively.

After a 16 percent correction from its September 2024 peak in dollar terms, global brokerage Nomura projects the Nifty 50 to reach 23,784 by the end of 2025. As for the trend through the year, Nomura anticipates the Nifty to trade in a range of 21,800-25,700, implying the possibility of another 5 percent downside on the lower end and a 12 percent upmove on the upper end of the spectrum.

These projections are based on valuing the Nifty 50 at 17 to 20 times its estimated forward earnings for December 2026.

Meanwhile, Nomura attributed the market correction over the past six months—particularly the 23 percent drop in small caps and 21 percent decline in midcaps—to market fatigue following a strong rally that had set high expectations.

To that effect, Nomura cautioned investors to avoid richly-valued stocks and rather be highly selective with their stock selection.

On the sectoral front, Nomura holds an overweight stance on financials, consumer staples, FMCG, oil and gas, telecom, power, pharma, internet, and real estate sectors. At contrast, it remains underweight on consumer discretionary, autos, capital goods, cement, hospitals, and metals.

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The brokerage has also updated its preferred stocks portfolio, adding Axis Bank while removing Hyundai Motor India, Nippon India AMC, and GE Vernova T&D. The brokerage has also added Voltas and ABB India to the latest list of its preferred stocks, while removing Maruti Suzuki and Havells.

The brokerage also found more misses than beats in India Inc's Q3 earnings, sparking downward revisions to FY26/27 estimates. "Earnings estimates have been revised lower for over 70 percent of companies. Currently, consensus projections indicate earnings growth of 8.6 percent, 16.1 percent, and 13.8 percent for FY25, FY26, and FY27, respectively," the firm noted.

Over FY24-27, the consensus expects an earnings CAGR of 12.7 percent for the BSE 200+ universe, outpacing the nominal GDP CAGR forecast of around 11.1 percent, Nomura remarked.

Looking ahead, Nomura does anticipate a cyclical recovery in economic growth from the lows of Q2FY25, driven by increased government spending and a more accommodative central bank policy. However, challenges remain for a near-term improvement in the corporate earnings-to-GDP ratio, which the firm believes, could cap the extent of earnings growth outperformance relative to economic growth in the short run.

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