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Index Outlook: Earnings a tad below estimate; current levels offer favourable risk-reward


As against the expectations of low double digit PAT growth at Nifty level, for Q3FY25, PAT growth at Nifty stood at steady 8% YoY. For manufacturing segment, encouraging thing was operating margins coming in at a six-quarter high at 18.9% (up 100 bps QoQ), primarily driven by benign commodity prices. For the listed universe, PAT growth came in broadly steady at 9% on YoY basis
On the Nifty EPS front, post Q3FY25, incorporating revised PAT estimates for Nifty constituents, we are seeing ~4% earnings downgrade. Key sectors like Capital Goods and Pharma witnessed an upgrade while Metals & Mining and FMCG space witnessed a downgrade.
Keeping the PE multiple intact, our index target gets revised to 27,000 levels i.e. ~21x PE on FY27E EPS of ₹ 1,300. Corresponding Sensex target is pegged at ~90,000 levels, offering healthy high teens upside potential over next 12 months.
With election led uncertainty behind us and growth-oriented Union Budget we expect corporate earnings to resort to double digit earnings trajectory starting FY26E.
With Nifty down ~12% from life time highs and mid & small caps down ~15-20%, we believe valuations have become more reasonable and present market provides extremely lucrative opportunities for long term wealth generation. Encouragingly, global and domestic interest rate cycle has started its downward trajectory & should support equity valuations going forward.
We believe any dips should be used to build a long-term portfolio of quality stocks
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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