Mumbai, December 11
The net profits of the Nifty 50 index are projected to grow by 16.3 per cent in FY26, according to a report by Kotak Securities.
The report outlined a steady growth trajectory for the index, following a decent 20.3 per cent earnings growth in FY24.
It said "Post-decent 20.3 per cent earnings growth in FY24, we expect net profits of the Nifty-50 Index to grow by 4.9 per cent (EPS of Rs 1,036) in FY25, by 16.3 per cent (EPS of Rs 1,206) in FY26 and by 14 per cent (EPS of Rs1,372) in FY27E".
The report noted that at the Nifty level of 24,275 (as of November 27, 2024), the index is trading at 23.4 times FY25 estimated earnings, 20.1 times FY26 earnings, and 17.7 times FY27 earnings.
It anticipated more broad-based growth across sectors in FY25, although profits from Oil Marketing Companies (OMCs) are expected to drag down overall growth as their earnings normalize.
The report recommends investors focus on select sectors and stocks at current valuations and advises accumulating on market dips. Preferred sectors include Banks, IT, Realty, Pharma, and Healthcare, which are expected to deliver strong returns in the medium to long term.
It stated "Our advice is to invest in select sectors and stocks at current valuations and keep adding on dips. Our preferred sectors are Banks, IT, Realty Pharma and Healthcare".
The report also highlighted that government spending, which has been slower than anticipated due to the recent general elections, is likely to pick up in the third and fourth quarters of FY25. This increase in spending is expected to provide a much-needed boost to GDP growth.
The report remained optimistic about the Indian market's structural growth story, emphasizing the continued support of retail investments, which have been a key driver since the post-COVID recovery.
It also mentioned that the investors are encouraged to maintain confidence in long-term investments, as the market's fundamentals remain strong despite near-term challenges.