Citi Research expects the NSE Nifty 50 to rise 10% to its target of 26,000 by December end. The third quarter earnings of India Inc are broadly in line with the brokerage's estimates, with Ebitda growth at 5% on the year.
The brokerage highlighted negative surprises in the energy and consumer sectors, and positive surprises in materials, healthcare, industrial and utilities. On an absolute basis, there's healthy double-digit growth in financials, healthcare, industrials, and utilities. Consumer, energy, and materials delivered a flat operating profit growth on a YoY basis.
Citi Research expects growth will likely pick up because of a rise in government capital expenditure in the last three months, and budgetary boost to consumptions. Earnings per share growth for Nifty 50 for financial year 2024 and 2026 stands at 8% and 11% CAGR, respectively, against 9% and 12% CAGR estimated earlier.
Most reduction in foreign institutional investors' positions were noticed in the oil and gas, power, auto, auto parts, and FMCG sectors, Citi Research said, citing data from National Securities Depository Ltd. The relative positioning of FIIs rose in IT, financial, and healthcare sectors.
After $9 billion FII outflows from January, Nifty 50 and midcap indices are down 2% and 8%, respectively on year-to-date basis. If the FII outflows sustain, it will impact near-term performance. However, a rise in public capital expenditure, and consumption supportive measure will nullify most of this impact.
Despite current correction, valuations are at or below five-year long-term average across most sectors. Citi Research is overweight on financial, telecommunications, and pharmaceuticals. It is underweight on metals, and consumer discretionary.
In the meantime, Citi Research added Voltas Ltd. to its midcap pick, with the company's market leadership in the room air conditioner business. Voltas Beko is slowly gaining market share in the other consumer durable category.
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