Jefferies expects Nifty 50 to rise 10% by December 2025; ICICI Bank, Axis Bank, SBI, Bharti Airtel in top picks

Global brokerage Jefferies is cautious on the Indian stock market as it estimates around 10 per cent rise in the Nifty 50 benchmark by the end of 2025, setting a target of 26,000 at the end of December. The index reached an all-time high of 26,277.35 on September 27 this year.

Jefferies highlighted that at a forward PE (price-to-earnings) of 20.5 times one year, Nifty valuations are about 6 per cent higher than the last five-year average. It expects the domestic market to grow by 10 percent in the next calendar year, in line with income growth.

Due to its cautious market outlook, Jefferies prefers large caps over mid-caps.

“As growth gradually picks up, overweight banks remain our top-trust consideration. Our top picks are ICICI Bank, Axis Bank, SBI, Bharti Airtel, JSW Energy, TVS, Coal India, Godrej,” Jefferies said. Properties and Sun Pharma.

Jefferies’ views on the Indian market

1. Increase in capital expenditure to support growth: Jefferies expects an increase in capital expenditure (capex) to support 6.5-7 per cent GDP growth in 2025.

“We expect nominal GDP to rise in line with growth (about 10 per cent) as populist spending picks up. The housing cycle is still strong, with inventories near a 14-year low. Private capital expenditure is also rising , With strong corporate balance sheets and opportunities in power, electrification, PLI schemes, construction materials, etc., are driving spending,” Jefferies said.

2. Recession may end by the first half of next year: Economic activity slowed during 2024 as national elections slowed government spending, while rainfall and the timing of the festival season impacted activity in the third quarter of the year. Additionally, Jefferies sees a regulator-driven 5ppt slowdown in credit growth, which also weighed on economic growth and consumption.

However, Jefferies believes an increase in government spending at the beginning of the year, improved liquidity and a lower base of activity later should accelerate GDP growth. This will also improve corporate income.

3. Corporate EPS growth will improve: Jefferies expects earnings growth to accelerate to 13 per cent in FY26E, reducing the decline by 2-3ppts from the current bottom-up expectation of 15 per cent.

“Sectors with double-digit earnings growth include industrials, property, banks, two-wheelers and telecom,” Jefferies said.

4. Increasing Supply to Cap Returns: Jefferies emphasized that Indian stock markets were supported by large domestic equity demand, even if FPIs were small net sellers in 2024. Brokerage firms see a possibility of it slowing down. However, FPI flows will likely act as a cushion.

“Equity supply rises to a record $60 billion in the nine months to calendar year 2024. Supply has accelerated in the second half with some large IPOs (Hyundai, NTPC Green, Swiggy) adding to the ongoing QIP/block supply. At $7 billion per month in Jul-Nov’24, supply has caught up with domestic equity demand, and markets have been flat in 2H, we believe unless the market improves Until then, equity supply will remain high, says Jefferies.

Jefferies’ Top Picks

Jefferies is overweight on banks, telecom, two-wheelers, healthcare, real estate, IT and power.

From the financial sector, Axis Bank, ICICI Bank, HDFC Bank, SBI, Cholamandalam Finance and Home First Finance are part of Jefferies’ India Model portfolio.

From the IT sector, Jefferies is overweight on Infosys, TCS and Coforge, while from the telecom sector, it is overweight on Bharti Airtel.

From the auto sector, Jefferies is overweight on Eicher Motors, Mahindra & Mahindra and TVS Motors, and from the healthcare sector, the brokerage firm is overweight on Max Healthcare, Sun Pharma and Emcure.

Coal India and JSW Energy are two power sector stocks on which Jefferies has an overweight rating. In the real estate sector, Jefferies is heavy on Godrej Properties and Macrotech Developers.

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