Nifty target for March 2024 at 19,250, IT stocks among top picks: BNP Paribas

NEW DELHI: While retaining a cautious stance on the market due to the risk of FII outflows on China’s reopening and a moderation in domestic inflows amid rising rates, global brokerage firm BNP Paribas maintained that Nifty would hit 19,250 in March 2024. It has given overweight rating on IT, financials, consumer durables and telecom sectors.

“We continue to find the market valuations expensive, based on various metrics we track," BNP Paribas' Kunal Vora said, adding that it is following a bottom-up approach to stock selection in its model portfolio.

Considering the 10-year G-Sec yield at 7.2%, earnings yield gap of 1.6% and FY25E EPS of Rs 1,076, the brokerage has arrived at a Nifty target price of Rs 19,250 by March 2024, which implies an upside potential of 8%. “Our implied P/E at 17.9x is at a premium to the average NTM PE since 2005 of 16x," Vora said.

India’s valuation premium to Asian peers has come off the peak but remains well above historical average. “Since 2015, as interest rates moderated, we have seen a large P/E expansion in the Indian market and we think some more time correction is likely,” he said.

“Consensus is building on a strong earnings recovery across sectors, ignoring a weak macro backdrop. Valuations look rich and at the current differential in yields of bonds and earnings, market returns have historically been negative over the next year,” he said in a report.

Among IT stocks, the brokerage has ‘buy’ ratings on Infosys and TCS. Other top picks include Axis Bank, Britannia, ICICI Bank, HDFC Bank, ITC, Reliance Industries and Tata Motors.

BNP Paribas has an ‘underweight’ rating on consumer staples, industrials, auto and consumer discretionary.

On IT stocks, Vora expects large-scale companies to outperform in an uncertain demand environment. “US’ IIP growth, which has a strong correlation with India’s IT services revenue growth, continues to be positive YoY," he said.

The equity strategist also likes banks as valuations remain favourable, considering the improving credit growth and stronger and cleaner balance sheets.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)