The Nifty 50, a group of the biggest companies in India, has fallen 14% from its highest point of 26,277.35 in September 2024. This decline is due to several reasons, including disappointing earnings from companies, foreign investors pulling out money, and rising tensions in global trade.
Brokerage firm Prabhudas Lilladher has lowered its target for the Nifty 50 index from 27,172 to 25,689. They pointed out that more companies are cutting their profit forecasts, with 30 stocks now expecting lower earnings compared to 21 in February 2024. They also noticed a 4.8% drop in the index since January.
The economy is feeling pressure from several factors: people are buying less, the Indian currency (rupee) is weakening, and there are worries about political issues, especially after President Trump won re-election in the U.S. India’s trade deficit is predicted to exceed $250 billion, and foreign investments are at a 17-year low.
As a result, the brokerage has reduced its expectations for earnings growth in the Nifty from 0.8% to 2.6% for the next few years. They expect more ups and downs in the market for a while but believe things may improve because of falling inflation and possible tax cuts.
Foreign investors have taken out $8.2 billion from Indian markets this year, making it tough for India to manage its financial needs. The rupee might fall even more, with predictions it could hit 88.50 per dollar by the end of FY25.
However, there are still good opportunities in areas like infrastructure, healthcare, and tourism. Some of the firms they recommend include ABB India, ICICI Bank, and Maruti Suzuki. They expect the Nifty to be valued at around 25,689 in the next 12 months but think it could go as high as 27,041 or drop to 24,337 depending on the economy.
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