Nifty rolling 12 months’ index target is 21,500 valuing it at 20x PE on FY25 Nifty EPS of Rs 1,080. Sensex target is 71,600: ICICI Direct

Persistent healthy double-digit earnings growth, macro stability to provide further strength to markets

Q4FY23 was a positive quarter with Nifty EPS for the quarter coming in at | 233/share, an outperformance of ~6% to our expectations (| 220/share). It was up 14% QoQ, 13% YoY. Outperformance was witnessed across the BFSI, auto and metals space while rest of the sectors reported a broadly in line performance. Management commentary was upbeat on domestic demand prospects with the rural space seeing green shoots amid healthy Rabi crop and robust farm cashflows. On domestic macroeconomic front, data came in encouraging with GDP growth for Q4FY23 coming in ahead of estimates at 6.1% with FY23 growth rate pegged at healthy 7.2% and India retaining its tag of being the highest growing major economy across the globe. Inflation also eased with latest CPI reading coming in at 4.7% with expectations ripe for interest rate upcycle nearing its peak. The government has also walked the talk on the fiscal consolidation front with fiscal deficit for FY23 at 6.4%. Encouragingly, FII flows have also turned positive starting from March 2023. With macro stability at bay, stable commodity prices and corporate earnings showing resilience by growing in healthy double digits, we retain our positive stance on domestic markets. We believe any dips should be used to build a long-term portfolio of quality companies that have lean balance sheets, are capital efficient in nature & have growth longevity.

Incorporating revised PAT numbers for index constituents post Q4FY23, our forward estimates undergo a minor ~1% downgrade. Over FY23-25E, Nifty earnings are seen growing at ~16.5% CAGR. Rolling over our valuations, we retain our Nifty target at 21,500 valuing it at 20x PE on FY25 Nifty EPS.

Sectoral earnings

Incorporating Q4FY23 results, key sectors like BFSI, auto, FMCG witnessed an upgrade while IT, oil & gas, metals, telecom, among others, witnessed a downgrade with aggregate Nifty earnings witnessing a revision of -1%.