Global and local market conditions appear to be navigating choppy waters, with valuations in broader markets continuing to look steep. Against this backdrop, BNP Paribas Securities believes that the NSE Nifty 50 index may touch 25,500 by the end of 2025, indicating a potential upside of 10% from the current levels. Considering the present market condition, the brokerage favours sectors with strong growth prospects. It prefers private sector banks, information technology (IT), telecoms and consumer discretionary to staples, pharma, insurance and metals. “Broader markets still look pricey, and the global and local macros look slightly less favourable,” BNP Paribas Securities said in a report. Of late, the benchmark index has retreated 12% from its all-time high levels scaled in September 2024. Likewise, broader indices Nifty Midcap 150 and Nifty Smallcap 250 declined 11% each from their respective lifetime levels. The brokerage firm added that domestic equities have been off to a weak start in 2025 due to rising US bond yields which have led to the dollar strengthening and FIIs selling in emerging markets. Though DII holdings are rising, India is not immune to FII selling as FII holdings are still 1.6x that of DIIs.
The BSE Sensex has also declined nearly 12%, or more than 10,000 points to 75,838 on January 21, 2025 from its all-time high levels of 85,978 touched on September 27, 2024. “Locally, earnings growth has slowed across sectors as the benefits of the post-pandemic reopening and commodity tailwinds are now behind. Slowing corporate tax and GST collections could constrain the government’s ability to stimulate the economy while maintaining fiscal discipline. Our heat map comprising more than 50 indicators indicates a slowdown in 2024, but also a bottoming out in Q3CY24,” BNP Paribas Securities said. The preference for large cap continues, BNP Paribas Securities said, adding it likes banks as the FY26 earnings growth outlook is strong with no major credit-cost spikes on the anvil. The risk-reward balance looks favourable at below-median valuations. It also likes IT services as the macro environment is far more favourable than in the last two years. “We like telecoms as the industry’s FCF (free cash flow) should continue to improve. In consumption, we continue to prefer affluent consumption to mass consumption (staples and 2Ws). Pharma looks expensive relative to earnings growth prospects. Metals outlook remains negative due to weak steel demand and prices,” the brokerage said. Among the top buy ideas, BNP Paribas is bullish on at least 18 stocks. It is positive on SBI Life Insurance with a target price of Rs 2,500, indicating a potential upside of more than 70%. It is followed by HDFC Bank (potential upside: 56%), Axis Bank (52%), Aster DM Healthcare (50%), Maruti Suzuki (44%), Bajaj Finance (40%), Reliance Industries (33%), Larsen & Toubro (33%) and Havells (30%). It is also positive on Mahindra & Mahindra, TCS, Infosys, Doms Industries, HUL, Titan, Bharti Airtel, ICICI Bank and Metropolis Healthcare.