Nifty to hit 27,000 in one year? PL Capital says Middle East crisis, El Nino can play a spoil sport; names 15 top picks

Global stock markets saw a sharp downturn earlier this year, but Dalal Street has begun to show strong resilience recently. In this backdrop, PL Capital increased its Nifty 50 target to 27,019, while cautioning that the prolonged West Asia crisis and impact of the mega El Nino year can play a “spoil sport”.

The Nifty target set by the domestic brokerage implies an upside potential of more than 12% from the benchmark index’s closing level of 24,078 on Wednesday. However, it cautioned that Dalal Street is now passing through a phase filled with uncertainty, and markets are likely to remain highly volatile. With resumption of hostilities in West Asia and rising probability of EL Nino, PL Capital remains cautiously optimistic with a stock specific approach.

The benchmark index has rallied over 7% in the past two months and nearly 8% from its 52-week low mainly due to the sharp decline in crude oil prices to $70 per barrel and an interim ceasefire in the West Asia war, the domestic brokerage noted, adding that the Indian economy has been one of the most resilient ones and Q1 FY27 has shown a steady demand trend.

PL Capital said the FCNR bonds issue is likely to provide a flip to credit availability by 3% in the system and boost growth. However, despite a cooling off in crude prices, it expects inflation to rise steadily due to the negative base of food inflation from June onwards. “Markets have been firm on recent pick up in monsoons, however, with a 10-15% deficit in H1 monsoons, super El Nino can increase inflation and impact rural demand in H2 2027,” it added.

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Nifty 50 is trading at nearly a 12% discount to its 15- year average PE although the multiples have increased in the recent rally, PL Capital noted, adding that it values the benchmark index at a 10% discount to the 15-year average PE of 17. 6x with FY28 EPS of Rs 1,532.
Which sectors have a positive outlookIn this backdrop, PL Capital believes that sectors like banks, non banking financial companies, capital goods or defence, telecom, jewellery, hospitals and consumer durables have a positive outlook. It however remained cautious on IT services, exports, cement, cements as well as oil and gas segments. “Resumption of hostilities in West Asia and El Nino remains a key risk to our call,” it said in a report dated July 10.

Notably, the conflict has now escalated further and oil prices have inched up as a result of Trump’s flipflop policies and closure of Strait of Hormuz, spooking investors.

PL Capital’s top stock picks

Among the large caps, PL Capital named Bharti Airtel, Britannia Industries, ICICI Bank, Kotak, Mahindra Bank, Larsen & Toubro, Shriram Finance and Titan Company as its top picks.

In the broader market space, Blue Star, CESC, DOMS Industries, Engineers India, HealthCare Global Enterprises, Ingersoll-Rand (India), Jindal Stainless and Rainbow Children’s Medicare were PL Capital’s top small and midcap picks.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)