PL Capital sees Nifty at 26,820 in next 12 months; Bharti Airtel, M&M, 5 others among high conviction picks

While maintaining its bullish view on the domestic equity market, brokerage PL Capital revised the 12-month Nifty target upwards to 26,820 (26,398 earlier), indicating an upside of over 6% from the current levels. However, the brokerage recommended that investors can selectively buy on dips on D-Street.

 

In a bull case scenario, PL Capital valued the benchmark equity index at a price-to-earnings ratio of 20.2 times and arrived at a target of 28,564. On the other hand, the brokerage sees Nifty at a 10% discount to a long-period average with a target of 24,407 in a bear-case scenario.

 

PL Capital added that robust domestic inflows provide a buffer for the market. The brokerage also anticipates a strong festival season demand, a rural revival, and potential interest rate cuts will further support the markets.

 

The upcoming US elections are a critical factor to monitor, particularly in light of rising global geopolitical tensions, including those in Southeast Asia. Given the high valuations in some growth sectors, PL Capital expects a shift towards defensive sectors such as consumer goods, durables, building materials, IT services, pharmaceuticals, and telecom.

 

“While sectors like capital goods, infrastructure, logistics/ports, EMS, hospitals, tourism, auto, new energy, and e-commerce present attractive opportunities, investors should remain mindful of their valuations,” PL Capital said in a report.

 

The brokerage added Bharti Airtel, IndusInd Bank, Interglobe Aviation, Lupin, Mahindra & Mahindra (M&M), BEML and Lemon Tree Hotels in conviction picks. On the other hand, it removed, HDFC Bank, ITC, Maruti Suzuki, Eris Lifesciences and TCI Express from conviction picks.

 

The brokerage further highlighted that the return variation between large-cap and mid-cap indices has significantly narrowed over the past three months.

 

“Meanwhile, the return gap with small-cap indices remains around 6%, as small caps continue to outperform large caps. The return differential between large caps and mid-caps will remain low,” PL Capital says.