Emkay Investment Managers Ltd. (EIML), the portfolio management services arm of Emkay Global Financial Services, expects India’s Nifty50 to reach 24,500 by December 2024.

This would imply a further upside of 7 per cent from the Tuesday’s closing level of 22,888.

Riding on an earnings growth of 15 per cent, Indian Nifty is expected to further scale up and surpass the level of 26,500 by December 2025, Manish Sonthalia, Chief Investment Officer, EIML said on Tuesday.

Nifty50 had hit a new all-time high of 23,110 on Monday before giving up on the gains during later trading hours and fell sharply on May 27.

Political developments

Discussing the equity market outlook for FY25 and FY26, Sonthalia on Tuesday noted that in the immediate near term, markets are going to focus on election results. 

An expected return of the NDA regime with a base case scenario of 330 seats will result in policy continuity along with major reforms on land, labor, and judiciary will support positive sentiment in the Indian markets, Sonthalia said.

“Markets today are pricing in closer to 330 seats to NDA. If that were to come about , we won’t see initial reaction in the markets. If the numbers on the count are 370-400, markets could get extremely euphoric in terms of sentiments. If the number for NDA falls below 300 and for BJP below 280, that would be massive negative surprise for markets as a whole. Right now it is wait and watch mode from market perspective,” Sonthalia said.

Over the long term, geopolitical developments and elections in the US and UK will be watched out for with Fed rate cuts in 3rd or 4th quarter of FY25, he added.

“BFSI, PSUs,and industrials are expected to do well. BFSI has led the earnings growth and seen a correction in valuation. Investment-related themes will come into reckoning big time. Focus will be on industrials, infrastructure play with power capex building up in the next 3 to 5 years. We are looking at re-rating of public sector units on a massive basis and if there is whole lot of money waiting to get invested into India, this is one space that cannot be ignored at all,” Sonthalia said. 

Sectors in focus

Some of the monopolistic areas where government entities will have an advantage such as defence, large oil marketing companies and power financiers are bound to do well, he said. 

After being in a slump post-Covid, pharmaceuticals are expected to see a good re-rating, according to Sonthalia. “There could also be some dark horses in commodities. We are witnessing K-shaped recovery in the premier end of consumer discretionary, with entry-level segment still not doing well,” Sonthalia said.

“We don’t see any negative surprises from government on the capital gains front in the upcoming Budget”.

EIML advises having a multi-cap approach with equal proposition in large-caps and mid-caps to take advantage of a broad-based growth in Indian equity markets. Most delta in the medium term is expected to come from the broader markets.

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