PL Capital sets Nifty target of 27,609, remains overweight autos and consumer

PL Capital Predicts Nifty Surge to 27,609

In its India Strategy Report, "Ready for the Next Leg of Growth," PL Capital boldly projects the Nifty index to reach a staggering 27,609 within the next year. This bullish forecast hinges on several key economic tailwinds, poised to ignite domestic consumption and propel earnings growth.

Why the Bullish Outlook?

PL Capital identifies several demand catalysts fueling this optimistic prediction:

• Low Inflation: CPI at a mere 1.6%, further boosted by food deflation.
• Robust Monsoon: Supporting rural incomes and bolstering agricultural output.
• Fiscal Stimulus: A ₹1,000 billion tax-cut injection planned for FY26.
• RBI Rate Cuts: The anticipated transmission of 100 bps in rate cuts will lower EMIs, sparking demand across housing, automobiles, and personal loans, particularly in the second half of FY26.
• GST 2.0 Reforms: Rate rationalization is expected to reduce prices across various sectors, including automobiles, consumer durables, staples, and medicines, significantly widening the consumption base.

The report emphasizes that reviving consumption is crucial for India's sustained growth. The government's "Atamnirbhar Bharat" vision, focusing on GST reforms, defense, agriculture, employment, and energy security, positions India to potentially transform the current US tariff challenge into a long-term opportunity.

Market Resilience and Potential Risks

Despite facing headwinds such as US tariffs and significant FII outflows (₹410 billion), Indian equities have demonstrated remarkable resilience since early July. Corporate performance remains relatively strong, with minimal deviations from expectations in sales, EBITDA, and PAT.

However, PL Capital acknowledges risks associated with fragile geopolitics and the potential for further US tariff actions, which could negatively impact global trade and GDP growth.

The Valuation Behind the Target

While PL Capital has slightly adjusted its Nifty EPS estimates (down by -1.4%/-0.4% for FY26/FY27), it still anticipates a robust 13.2% CAGR over FY25-27, projecting EPS at ₹1,254/₹1,445. The current Nifty valuation of 18.9x one-year forward EPS represents a slight discount to its historical average. Applying a 19.1x multiple to the March '27 EPS of ₹1,445 results in the 12-month Nifty target of 27,609.

Structural growth themes in defense, infrastructure, EMS, hospitals, and power transmission remain promising, although PL Capital sees limited scope for further re-rating in these sectors.

Model Portfolio Adjustments

PL Capital maintains an overweight stance on Banks, Healthcare, Consumer, Telecom, Auto, and Capital Goods sectors. IT Services and Commodities remain underweight. Reflecting its positive consumption outlook, the brokerage has increased its holdings in Automobiles and Consumer goods while slightly reducing exposure to Capital Goods, Healthcare, and Banks (which remain overweight).

GST 2.0: A Catalyst for Consumption

GST 2.0 aims to simplify the tax structure by rationalizing rates, primarily focusing on a 5% and 18% structure. This is expected to reduce the tax burden on everyday goods, potentially stimulating consumption. PL Capital anticipates fewer classification disputes and overall economic benefits.