“Our base case assumes a 7.5% reduction in consensus earnings estimates with price-to-earnings multiple trimmed to 18.5x from 21x previously,” Nomura’s note stated.
The December 2026 target has been pegged in the 21,000 – 29,100 range, with the bull case assuming an immediate de-escalation of geopolitical tensions.
Indian equities have corrected 8% in the last two weeks. The Nifty and the Nifty Bank are both down 13% each from their respective record high levels. The only two previous instances of such a fall are during the Covid-19 pandemic in 2020 and the start of the Russia-Ukraine war in 2022.”We think an additional 5% correction is a distinct possibility in the near-term, with small and mid-cap stocks at relatively greater risk,” the note said, adding that adverse flows from FIIs can drive the markets even lower in the short-term.
However, the brokerage has said that a correction beyond 5% from current levels should present a buying opportunity from a long-term perspective.
During this period, Nomura expects utilities, coal, oil producers, healthcare, pharma, consumer staples and telecom are likely to outperform. “Fundamentally, we are constructive on these sectors, except for healthcare services and staples, where we find valuations to be demanding,” Nomura said.
The brokerage went on to add that the concerns arising from the impact of AI are premature and overdone, and their base case assumes an eventual resolution that will ensure supplies and lower oil prices.
