Nifty may cross 22,500 in 12 months, says Prabhudas Lilladher; picks Hindalco, 3 more stocks as conviction buys

Nifty may hit a target of 22,584 in the next 12 months even as the market manoeuvres through headwinds like US interest rates, El Nino's impact on crops and inflation, volatile crude prices and the election year in India, Prabhudas Lilladher said in a note on Wednesday. The brokerage remains positive on auto, banks, capital goods, hospitals, and discretionary consumption and picks Max Healthcare, Hindalco Industries, Eris Lifesciences and Sunteck Realty as its conviction buys.

As its contra picks, Prabhudas has added Kajaria Ceramics and Restaurant Brands Asia while removing SBI, Carborundum, Chalet Hotels and Crompton Greaves Consumer Electricals.

The broking firm has also raised its target price on Maruti Suzuki, Ceat, Aarti Industries, Axis Bank, ICICI Bank, Supreme Industries, Voltamp Transformers, RR Kabel, Fortis, Max Healthcare Institute, Jindal Stainless, IPCA and Lupin. Major target price cuts have been made in UPL, Sumitomo, Greenpanel, Gujarat Fluorochemicals, IGL, Bajaj Electricals, Westlife Foodworld and Reliance Industries.


Nifty is trading at a 17.2% discount to the 10-year average which provides comfort to Prabhudas who believes that the headline index is not trading in a bubble zone. The 50-stock index has remained flattish in the past 6 weeks and given just 1.6% return in the quarter gone by, riding on inflows of the domestic institutional investors (DIIs) even as the foreign institutional investors (FIIs) preferred selling the domestic equities, the note said.

Markets have been taking all headwinds in their stride and the action has been very stock specific with the mid and smallcap counters continuing their outperformance over the largecaps. Sectoral rotation has allowed realty, metals, power and healthcare stocks to join the party.

Key monitorable
1) With festival season witnessing high single-digit growth in sales of 2W/PV, 40-50% growth for online platforms, robust sales of jewellery despite high prices and economic boost coming from cricket world cup, the demand trends in December will remain critical. In FY23, there was sharp deterioration in demand, post Diwali, Prabhudas said.

2) Capex recovery is on track with strong performance from capital Goods and infra segments and strong outlook while banks' balance sheets remain healthy.

3) 2024 general election is the mother of all elections. Notwithstanding a stable government over the past decade, the outcomes from the ongoing state election will dictate market momentum in the run-up to the Lok Sabha election.

4) India has seen 6% deficiency in rainfall in 2023 which is likely to impact specific crops in specific states. While sugar prices are at multi-year high. Shortfall in Malaysia palm oil output in January-February 2024 may impact the prices of the entire edible oil basket.

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