ICICI Securities forecasts a rebound in corporate earnings, projecting double-digit growth starting in the fiscal year 2025-26, driven by a growth-oriented Union Budget and reduced election uncertainty.

Following adjustments to profit after tax estimates, the Nifty index target has been revised to 27,000, reflecting a price-earnings multiple of approximately 21x based on FY27 earnings per share of Rs 1,300.

India's core sector growth has slowed to 4% in December 2024, down from 5.1% a year earlier, indicating potential economic headwinds.

The Nifty 50 index has seen a decline of about 12% from its peak, while mid and small-cap stocks have experienced a more significant drop of 15-20%, presenting attractive long-term investment opportunities.

The Sensex target is set at approximately 90,000, suggesting a potential upside of nearly 19.5% from current levels over the next year.

While large-cap stock valuations are considered reasonable, analysts warn of frothy valuations in mid and small-cap stocks, especially in light of rising global trade tensions and potential tariffs on India.

The BSE Sensex has fallen nearly 12% from its 52-week high of 85,571.85 reached in late September 2024, with notable losses in companies like Asian Paints and Tata Motors, which dropped by 32% and 31%, respectively.

Analysts are optimistic that this recovery will enable the Sensex and Nifty to reach new all-time highs within the next 12 months.

A downward trend in both global and domestic interest rates is anticipated to bolster equity valuations moving forward.

Despite India's strong macroeconomic fundamentals, challenges to economic growth remain, as evidenced by downward revisions in GDP forecasts and a sluggish recovery in household consumption.