Key Points

Reflecting the positive sentiment, “we have raised Nifty 12-month target to 26,889, valuing the Nifty at 2.5 per cent discount to 15-year average PE at 18.5x," PL Capital, a financial services provider, said in its report.

Domestically-oriented sectors, such as domestic pharma, select staples, banks, capital goods, defence, and power, will outperform in the near term.

“In the first quarter, government capital expenditure was front-loaded, recording impressive growth of 61 per cent in April and 39 per cent in May, supported by strong momentum in new project orders and a significant increase in defence spending," the report said.

At the same time, the Reserve Bank of India's (RBI) decision to reduce the repo rate by 100 basis points and announce a phased 100 basis point cut in the cash reserve ratio (CRR) has also played a role in sectoral growth.

However, the firm forecasts modest top-line growth of 2 per cent, supported by stronger gains of 15 per cent in EBITDA and 15.6 per cent in profit before tax (PBT).

“Although a broad-based recovery is yet to take hold, factors such as tax relief, normal monsoons, easing inflation, and lower interest rates are creating conditions for a consumption-driven rebound," said Amnish Aggarwal, Director-Research, PL Capital.

According to the report, rural sentiment remains resilient, while urban sentiment is gradually improving, particularly in discretionary segments.

Domestic-oriented sectors will lead the next leg of market performance and are being overweight on banks, healthcare, consumer, telecom, and capital goods, while remaining underweight on IT services, cement, metals, and oil and gas.

Meanwhile, the rural economy shows greater resilience, with the rural Current Situation Index (CSI) rising from 96.5 in January 2024 to 100 by May 2025.

This recovery is anchored by improved Kharif sowing — up 11 per cent YoY—benign food inflation, and robust government spending in rural development, the report highlighted.

- IANS