Nifty target raised to 26,820; 7 new conviction stock picks: Prabhudas Lilladher

Domestic brokerage Prabhudas Lilladher (PL Capital) has revised its Nifty target to 26,820 in its latest India Strategy Report. This updated target is based on a valuation of Nifty at 19 times its March 2026 EPS estimate of Rs 1,411, aligning with the index's 15-year average price-to-earnings (PE) ratio. The previous target was set at 26,398.

In a bull case scenario, PL Capital values Nifty at a PE of 20.2x, leading to a potential target of 28,564. On the other hand, in a bear case scenario, where Nifty may trade at a 10% discount to its long-period average, the target could drop to 24,407.

Since the last India Strategy Report released on 11th July 2024, Nifty has delivered a return of 1.6%, despite rising volatility due to deteriorating geopolitical conditions. The Indian markets have been supported by strong domestic institutional investor (DII) inflows, even as foreign institutional investor (FII) selling has eased. The report notes that while market volatility has been high, driven by factors such as the Japanese carry trade and global geopolitical uncertainty, expectations for a festival season revival and favorable monsoon conditions have bolstered sentiment.


Demand conditions remain mixed, but optimism is driven by a strong infrastructure spending push by the Government of India (GOI), a revival in private capex, and the increasing likelihood of an interest rate cut by the Federal Reserve. Additionally, the overall inflation dropping below 4% raises hopes for a potential repo rate cut in the second half of FY25.

New Conviction Picks:
Prabhudas Lilladher has updated its high-conviction stock picks, removing HDFC Bank, ITC, Maruti Suzuki, Eris Lifesciences, and TCI Express due to factors like recent rallies and slower growth. The firm has added the following stocks to its conviction list:

Bharti Airtel: Bharti Airtel, with a subscriber base of 355 million and an ARPU of Rs 211, is expected to benefit from tariff hikes in the prepaid category and postpaid plans, leading to estimated FY25/26 net subscriber adds of 13/19 million with an ARPU of Rs 230/268.

IndusInd Bank: Projected loan growth of 16-17% over FY24-26E, with strong NIMs of 4.3-4.4%, is expected to lead to a core earnings CAGR of ~19% despite some concerns over liability growth.

Interglobe Aviation (IndiGo): Indigo is focusing on expanding its international reach with Airbus A350-900 orders and premiumisation through a new business class. Despite challenges like fuel prices and engine issues, a 16% revenue CAGR is expected over FY24-26.

Lupin: Lupin has shown a significant turnaround in profitability with better product mix and niche launches in the US, and is expected to sustain margins with a strong pipeline.

Mahindra & Mahindra (M&M): M&M is well-positioned for growth in the UV segment, with an expected automotive volume growth of 12.6% CAGR from FY24-26E and a PAT CAGR of 22.1%.

BEML: BEML is poised for long-term growth with a robust order pipeline in metro and defence sectors, leading to an expected revenue/Adj. PAT CAGR of 18.8%/37.6% over FY24-26E.

Lemon Tree Hotels: Lemon Tree Hotels is expected to see improved occupancy and pricing in 2HFY25, with a sales/EBITDA CAGR of 17/22% for FY24-FY26E.