“Nifty EPS has seen only minor tweaks in the current quarter with 13.2% EPS CAGR over FY22-24 with FY23/24 EPS of Rs 857.9 and Rs 978.4. Our estimates are lower than consensus by 3.9/5.0% for FY23/24. Nifty is currently trading at 19.9x 1-year forward EPS, a 5% discount to the 10-year average of 20.5x,” the brokerage said in a report.
Past three major corrections show that Nifty bottomed out around the 10-year average PE except in March 2020, when it bottomed out at a 23% discount to the 10-year average.
Valuing the headline index at its 10-year average PE (20.5x) with March 2024 EPS of Rs 978.4, the brokerage has arrived at the June 2023 target of 20,057 in the base case scenario. In the bull case scenario, the target is 22,063.
“We remain positive on India’s growth story given strong tailwinds and expect steady returns with a stock-specific approach,” Prabhudas analysts Amnish Aggarwal and Anushka Chhajed said, adding that the June quarter saw sales beat of 0.6 per cent, while EBITDA and PBT were lower than estimates by 6.5 per cent and 9.7 per cent, respectively.
Sectorally speaking, it remains overweight on auto, banks, IT services, capital goods and healthcare and underweight on metals, cement, consumer, oil and gas and NBFCs.
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