Down 16% from peak! Nomura projects THIS target for Nifty 50 by 2025-end

With the Nifty50 declining 16 per cent from its peak in September 2024, global brokerage Nomura has projected the index to reach 23,784 by the end of 2025. The Japanese brokerage expects the Nifty to trade within a range of 21,800-25,700, implying a potential downside of 5 per cent on the lower end and an upside of 12 per cent on the upper limit.

Nomura has factored in a valuation range of 17-20 times one-year-forward earnings for the Nifty50, suggesting that the index may gravitate toward the lower end of this range. The brokerage attributed the recent six-month market correction, including a 23 per cent drop in small caps and a 21 per cent decline in midcaps, to market fatigue following a prolonged rally that had set high investor expectations.

Investment Strategy and Sector Preferences

Nomura advised investors to be highly selective and avoid stocks with stretched valuations. It identified two primary risks affecting market sentiment: a slowdown in investment growth and an increase in equity risk premium due to global trade conflicts and macroeconomic uncertainty. While the brokerage foresees slower economic growth in FY26, it expects GDP to expand at a stronger pace in FY27.

Despite a possible rebound to 25,700 in the best-case scenario, Nomura noted that the Nifty would still remain below its all-time high of 26,277.35, recorded in September 2024.

Sectorally, Nomura remains overweight on financials, consumer staples/FMCG, oil & gas, telecom, power, pharma, internet, and real estate. It maintains an underweight stance on consumer discretionary, autos, capital goods, cement, hospitals, and metals.

Among stock-specific recommendations, Nomura has an ‘Add’ rating on Axis Bank and a ‘Remove’ stance on Nippon Life India Asset Management (NAM), Hyundai Motor India, and GE Vernova T&D India. It has an ‘Add’ rating on Voltas and ABB but a ‘Remove’ rating on Maruti Suzuki India (MSIL).

The brokerage noted that the Nifty’s price-to-earnings (P/E) multiple had declined to 19.0x one-year-forward earnings from 21.3x at its September 2024 peak.

Q3FY25 Earnings and Market Performance

According to Nomura, India’s stock market has witnessed a strong rally over the past few years, creating high expectations for earnings. However, headwinds such as weaker government capital expenditure, global trade policy uncertainties, rising household savings, and fiscal consolidation efforts may impact the earnings-to-GDP ratio.

Since January 2025, consensus earnings estimates for December 2026 have been revised lower by 3.5 per cent. Nomura anticipated potential consensus earnings cuts of 3-6 per cent for FY26-FY27, with further minor reductions still possible.

In its BSE 200+ coverage universe, Nomura analysed Q3FY25 earnings trends across 228 companies, reporting aggregate net profit growth of 16 per cent year-on-year. Two companies—Bharti Airtel and State Bank of India (SBI)—contributed 44 per cent to this YoY earnings increase. Adjusting for significant one-offs, the overall earnings growth stood at 11 per cent, an improvement from the 6 per cent growth seen in the past two quarters.

Excluding financials, commodities, and telecom, the year-on-year PAT growth for Q3FY25 was 6 per cent, marking a slowdown compared to the prior two quarters. Sales and EBITDA growth were reported at 10 per cent and 9 per cent, respectively.

Of the 174 companies with available consensus estimates, 57 per cent missed expectations, though aggregate reported earnings were 4 per cent higher than consensus estimates.

Future Outlook and Growth Projections

Nomura expects a cyclical economic recovery from the lows of Q2FY25, driven by increased government spending and a more accommodative central bank policy. However, the brokerage remains cautious regarding a near-term improvement in the corporate earnings-to-GDP ratio, which could limit earnings growth outperformance relative to economic expansion.

Consensus estimates currently suggest earnings growth of 8.6 per cent in FY25, 16.1 per cent in FY26, and 13.8 per cent in FY27. Over the FY24-27 period, the BSE 200+ universe is expected to post an earnings CAGR of 12.7 per cent, exceeding nominal GDP growth expectations of 11.1 per cent.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.