India Stock Market Strategy - In Fine Fettle: Prabhudas Lilladher

Prabhudas Lilladher Report

NIFTY has given 8.7% return over the past six weeks as confluence of strong FII inflows, state election results and hopes of interest rate cut in 2024 ignited the markets.

Domestic demand remains mixed as rural recovery is stunted due to inflation and poor spatial distribution of monsoons while urban India is resilient. we believe that it is a passing phase and India will see significant shift in consumer wallet share towards discretionary and premium products as we move towards $5 trillion economy in coming few years.

We believe trends are already visible across passenger vehicles, two-wheeler, fmcg, jewellery, mobiles, smartwatches, real estate, food delivery, fintech and travel etc.

India is in the most transformative phase in its history with massive Infrastructure development (highways, logistics, ports, railways, metro), defense, production linked incentive and significant increase in domestic demand with rising income levels and youngest population globally.

Markets have been exuberant post state election results as chances of ruling NDA coming to power post elections has increased significantly, however it remains the biggest risk also.

We remain positive on banks, capital goods, hospitals, pharma and discretionary consumption. NIFTY is trading at 10.8% discount to 10-year average with 12.6% earnings per share compound annual growth rate over FY24-26.

We increase our base case NIFTY target to 24544 (22584 earlier) with clear focus on quality and companies with strong balance sheets and business moats.

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