InCred hikes Nifty target by 4%; adds Axis Bank, UPL to High-Conviction List

Time of India

25-04-2025

InCred Equities
has raised its
Nifty target
by 4% to 24,280, despite continued
earnings downgrades
and ongoing volatility in the market, citing improved outlook from easing crude oil prices and expectations of above-normal rainfall. It has also added
Axis Bank
and
UPL
to its high-conviction stock list, reflecting selective opportunities amid ongoing market volatility.
The brokerage, however, maintained a cautious stance on
Indian equities
, flagging premium mid-cap and small-cap valuations, policy uncertainty, and lingering global trade tensions.
Cautious outlook amid persisting earnings cuts
InCred said that the Nifty50 earnings per share (EPS) growth for the March 2025 quarter is expected to be modest, at just 8% year-on-year (YoY), with continued downside pressure from sectors like Information Technology (IT) and banking. The brokerage said that despite some improvement in certain sectors like telecom, healthcare, and materials, the broader earnings downgrade trend remains intact, with FY26F Nifty-50 EPS seeing a 2% cut.
Of the 73 companies that have reported their March quarter earnings so far, sales rose 5% YoY and profit after tax increased 12%, helped by slower expense growth, the brokerage noted.
For the broader market, InCred's EPS downgrade expectations persist, especially in the consumer discretionary and energy sectors, which have been underperforming. The brokerage noted that mid-cap and small-caps have surged by 10-16% since the March 2025 lows, reaching premium valuations compared to the Nifty-50, which has further raised concerns over stretched market valuations.
The Nifty-50's forward P/E remains below its 10-year average, offering some comfort. However, InCred flagged a 20–35% valuation premium in broader markets as a red flag, especially amid macro headwinds.
Sectoral insights
The brokerage upgraded the construction sector to a neutral rating, citing improved valuation comfort after significant underperformance in FY25. In addition to adding
Axis Bank
and UPL to its conviction list, InCred also upgraded Larsen & Toubro,
Sonata Software
, and
Dilip Buildcon
to add rating, while downgrading
Wipro
and
HCL Technologies
.
Axis Bank, in particular, is seen as a key beneficiary of the Reserve
Bank of India
's measures to improve liquidity and boost credit growth. UPL, meanwhile, stands to benefit from the ongoing recovery in the global agrochemicals sector, the brokerage noted. .
Public sector banks like
Bank of Baroda
,
Punjab National Bank
,
Canara Bank
, and Bank of India were brought under coverage amid improved outlook, the brokerage said.
Mixed macro picture and external risks
While rural demand, electricity consumption, and easing inflation signaled a macro pickup, InCred cautioned that weak auto and housing sales, sluggish industrial growth, and poor credit disbursal continue to weigh on growth. The RBI's two recent rate cuts and the government's income tax reductions aim to support momentum.
Also read:
Axis Bank Q4 Results: PAT flat at Rs 7,117.5 crore but beat estimates, NII up 5.5%
Still, external shocks remain a key risk. Rising protectionism, geopolitical tensions, and oil price volatility could derail recovery. The recent US-China tariff war has already led to a downgrade in India's GDP forecast to 6.5% for FY26 by the RBI's Monetary Policy Committee.
'These uncertainties would dampen growth by affecting investment and spending decision of businesses and households,' the brokerage said.
The bull-case probability has been raised to 25% from 5% earlier, while the bear-case scenario has been cut to 25% from 45%. A more adverse scenario, involving escalation of regional geopolitical conflict, could drag the index down to 21,288, InCred Equities said.