ICICI Securities predicts Nifty 50 to reach 24,800 by March 2025; Top picks include L&T, BHEL, Zomato, M&M, and SBI Life

From the March 2023 lows, the Nifty 50 index rose 31%, while trailing profits increased by about 18% in the same period. As a result, values increased from a fair 17.5x to a high 20x on a forward earnings basis. According to experts, our one-year forward objective for the Nifty 50, which is set for March 2025, is 24,800. This represents a 10% upside against the long-term predicted returns of around 14%.

Analysts noted that P/E expansion, rather than trailing earnings growth, has been the primary driver of the Indian stock market's rebound since the lows of March 2023, suggesting high expectations for future profits growth. According to analysts at ICICI Securities, the Nifty 50 index rose 31% from its March 2023 lows, compared with a trailing earnings expansion of about 18% over that same period. As a result, values increased from a fair 17.5x to an inflated 20x on a future earnings basis. The market as a whole saw an even greater rise than their profits expansion, with microcap, smallcap, and midcap equities returning 62%, 73%, and 100% from their March 2023 lows, respectively. Analysts predict an improvement in earnings as a result of India's GDP growth, which surprised them positively in the December quarter with 8.4% growth.

"Real GDP growth for Q3FY24 was significantly higher (8.4% YoY) than consensus estimates, driven by the 'investment rate,' leading to a consensus upward revision to FY24 GDP."

According to ICICI Securities analysts Vinod Karki and Niraj Karnani, this might potentially lead to increased profit revisions - such expectations have begun egging on stock prices, which are already stretched in terms of valuations, hence lowering the margin of safety. 

They think that, as it has for the previous year, upward growth revision is expected to continue to come from the capital-intensive and cyclical sectors, which will explain their outperformance. According to experts, our one-year forward objective for the Nifty 50, which is set for March 2025, is 24,800. This represents a 10% upside against the long-term predicted returns of around 14%.