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Informist, Tuesday, Dec. 10, 2024

 

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--Kotak Sec: Base case Nifty 50 see 26100 by Dec 2025 
--CONTEXT: Kotak Securities details its market outlook for 2025 
--Kotak Sec: Bull case Nifty 50 seen 28800 by Dec 2025 
--Kotak Sec: Bear case Nifty 50 seen 23300 by Dec 2025 
--Kotak Sec: Nifty 50 FY25 earnings growth seen at 4.9% 
--Kotak Sec: Nifty 50 FY26 earnings growth seen 16.3%, FY27 at 14% 
--Kotak Sec: Prefer banks, IT, realty, pharma, healthcare stocks 
--Kotak Sec:FPI outflow may rise near term amid dominance of passive inflows 
--Kotak Sec:See modest increase in svcs surplus FY25 if global growth steady 
--Kotak Sec: Expect pickup in govt capex Oct-Mar to revive GDP growth 
--Kotak Sec: Mkt corrections stem from uncertainty, better macros to aid mkt 
--Kotak Sec MD: See Nifty 50 EPS at INR 1,206 in FY26, INR 1,372 in FY27 
--Kotak Sec: See crude oil prices falling below $60/bbl in FY26 
--Kotak Sec: See crude oil prices falling in FY26 on stagnant China demand

 

MUMBAI – While the Nifty 50 is expected to rise to 28800 points by December 2025 in a bull case, the benchmark index will probably be around the lowest level it saw last month, 23300 points, by the end of next year in a bearish scenario, Kotak Securities said as it detailed its 2025 outlook for the equity market. The base case for the 50-stock index is pegged at 26100 points by December 2025. The index could reach 28000-29000 points if it breaches its previous high of a little over 26000 points after the Budget for 2025-26 (Apr-Mar) is presented, Shrikant Chouhan, head of equity research at Kotak Securities, said.

 

Although the companies in the 50-stock index are likely to post slower earnings growth of 4.9% for FY25, the index is seen up 16.3% for FY26. The earnings per share for Nifty 50 is pegged at INR 1,036 for the current financial year, of which the index has already earned nearly INR 500 during the first half, Chouhan said. The EPS for the benchmark index for FY26 is pegged at INR 1,206 and for FY27 it is pegged at INR 1,372, up 14% on year.

 

The festival season and wedding rush, which are expected to do better than last year, will support the earnings for the second half, the brokerage said. Improved government spending and favourable demographics, which will drive consumption, will also aid corporate earnings for Oct-Mar, it said. Besides support from improved growth in companies' profits, strong domestic inflows will boost market sentiments. Unlike earlier, the Indian equities market is becoming self-reliant, Chouhan said, adding that foreign portfolio investors' holdings in the Indian equities market have fallen to 16% from a high of 20.5%.

 

Kotak Securities said the increased inflow from domestic retail investors helped avert a crash-landing of the Indian equities market in October and November when foreign portfolio investors sold nearly INR 1.11 trillion in equities. Contrastingly, the equity market had seen INR 930 billion of foreign inflows till September. While a crash-landing was avoided, there were some healthy corrections in the market, the brokerage said. Total systematic investment plan inflows of INR 1.59 trillion during Apr-Oct, up 48.5% on year, and a 4.5-time increase in dematerialised accounts in the last four years indicate a rise in the number of retail investors in India, Kotak Securities said.

Emerging markets are less likely to be favoured destinations for asset allocators given the worsening geopolitical conditions and trade. The brokerage expects further acceleration in FPI outflows amid dominant passive inflows in the category. The brokerage said it is "cautiously optimistic" in the long term, and advised investors to stay invested. "...the theme that we are saying here is that we should now look at value rather than momentum," Shripal Shah, managing director and chief executive officer of Kotak Securities, said.

 

After a great rally in mid-cap, small-cap, and even large-cap stocks, investors must moderate their expectations of returns, he said. The Nifty 50 companies have given more than 18% returns so far this year, with mid-caps and small-caps giving returns of over 25%, the brokerage said. A stable government and proactive regulatory framework from the Securities and Exchange Board of India will ensure that India remains the most attractive place for investment, he said.

 

As many as 80% of the companies in the 50-stock index, such as HDFC Bank, ICICI Bank, Bharti Airtel, Power Grid Corp. of India, and Shriram Finance, gained between 10% and 140% in 2024, Chouhan said. Talking about return on equity, Chouhan said 34%, or about a third, of all listed companies have a healthy return on equity of around 14%. In terms of return on equity, India is second only to the US, Chouhan said.

 

While FY25 will see broad-based growth across sectors, oil marketing companies are likely to drag down overall profits, with their profits expected to normalise this year. The brokerage said it prefers the banking, information technology, realty, pharmaceuticals, and healthcare sectors.

 

"Around 2014, the market was close to what, some 7000 level, and from there the market is now at 26000 levels. It is something unbelievable," Chouhan said, and attributed this bullish stance of the market to a stable government and a rise in the number of people taking an active interest in the market. The Nifty 50 index currently trades at 22.5 times the estimated EPS for FY25, 19.4 times the estimated EPS for FY26, and 17 times the estimated EPS for FY27, Kotak Securities said.

 

Market corrections often stem from uncertainties, but improvements in domestic macroeconomic indicators will support the market during such corrections, the brokerage said, and added that it expects India's macroeconomic situation to improve in the coming quarters, with inflation expected to be moderate.

 

While India's goods trade deficit rose to $27.1 billion in October from $20.8 billion in September, its services trade surplus remained steady at $17 billion. The brokerage said it expects the services surplus to see a moderate increase in FY25 if global growth remains broadly steady. While government spending has been slower than expected in the year so far due to the general election and a slew of state elections, the brokerage expects spending to pick up in Oct-Mar and help revive GDP growth from its current level. The brokerage expects real GDP growth of 6.1% in FY25 and 6.4% in FY26, also due to an expected increase in consumption.

 

Besides expected improvement in macroecomonic conditions, favourable demographics will also help in incremental growth in the Indian equities market, Kotak Securities said. A rise in the share of 30-year-olds to 59-year-olds in the country's population will also benefit consumption in India, it said. This, in turn, will add to corporate earnings, further boosting the Indian equities market. 

 

GOLD, SILVER, AND CRUDE OIL

Brent crude oil prices have been range-bound at $72 per barrel despite global conflicts due to stagnant demand from China and a rise in production in countries that are not part of the Organization of the Petroleum Exporting Countries, the brokerage said. Crude oil prices staying below $75 per barrel will be beneficial for the Indian economy, it said. Crude oil prices are likely to fall below $60 per barrel in FY26, Kotak Securities said.

 

Demand for gold and silver is at an all-time high and will continue to rise as the precious metals offer better returns than other asset classes in the long term, the brokerage said. While gold acts as a diversifier of known and unknown risks in an investor's portfolio, silver is far more volatile, the brokerage said.  End

 

US$1 = INR 84.85

 

Reported by Aman Aryan, Steffy Maria Paul, and Akshita Kumar

Edited by Rajeev Pai

 

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