Indian stock market began the month of September with a record breaking rally as both the benchmark indices scaled their life-time highs on Monday. The Sensex hit a fresh high of above the 82,700 level, while the Nifty 50 surpassed 25,300 level for the first time.
The equity market steamrolled through a rocky H1FY25, with the Nifty delivering more than 13% returns since March 31, 2024. Brokerage firm Emkay Global Financial Services raised its Nifty 50 target to 26,000 for September 2025, up from 22,000 for June 2025 earlier, with a generous target PER of 22x.
“We see the broader market range-bound with speedy sector rotation. The key themes for a relatively serene second half of FY25 are interest rate cuts and a possible revival in rural and mass consumption,” said Seshadri Sen, Head Of Research And Strategist at Emkay Global Financial Services.
A US Federal Reserve interest rate cut in September appears inevitable and the bond market is now pricing-in 100 bps by December. Emkay Global believes the Reserve Bank of India (RBI) will follow suit, with a strong chance of a front-ending in October or December. This should be accompanied by a change in the liquidity stance too.
“We believe it will have little impact on the real economy or on aggregate demand. At the margin, Autos, Real Estate, and NBFCs benefit, while IT gains from the US optimism,” Sen said in a strategy report.
He believes the turn in the monetary policy cycle will be the catalyst for a recovery in system deposit growth. However, the analysts see not only front-ended net interest margin (NIM) pressures as repo-linked mortgages reprice downward, but also a lagged offset on cost of funds.
“Regulatory tightening of lending practices and falling inflation are likely to hurt loan growth, adding to the sector’s challenges. We remain underweight on financials, as we believe that lenders have not de-rated enough to reflect the new reality of lower growth,” Sen said.
Emkay Global raised target Nifty PER to ~22x (+1sd) from 19x and its index target to 26,000 from 22,000. It believes the upside on the Nifty is limited to 4%, and sees an extended period of sideways movement.
The brokerage firm believes the focus will be on generating ideas in SMIDs, where it still sees pockets of value despite some segments looking very frothy.
Emkay Global stays Overweight on IT as it sees the US rate cuts portend earnings upgrades, despite the elevated valuations. It also raised Energy to Overweight. The brokerage cuts FMCG and Materials to Neutral on valuations, despite a positive operating environment.
Financials remain Underweight as it is structurally negative on the sector due to weak growth. It retained Overweight on Healthcare and Durables, and Underweight on Metals.
In its model portfolio, the brokerage firm added Varun Beverages, ONGC, Larsen & Toubro, Ambuja Cements, HCL Technologies, Delhivery, and ITC. It dropped Maruti Suzuki India, Shree Cement, Wipro, Nestlé India, and ICICI Prudential Life Insurance.
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 making any investment decisions.
