Nomura Nifty target 2025: Sharing a subdued outlook for India stock markets for calendar year 2025, global brokerage Nomura has pegged 23,784 as December 2025 Nifty target.
Factoring-in downside risks to earnings, along with slightly expensive valuation, Nomura said it expects the stock markets to deliver returns in the range of -8 per cent to +9 per cent over the next one year.
"The Nifty is currently trading at 19.4x one-year forward consensus earnings, close to the past three-year average of 19.2x. Over the past three years (CY21-24), the market has traded in the range of 17-23x. This is compared to pre-Covid (2017-19) average of 17.7x when the market traded in a range of 16-19x. Slowdown in earnings growth and potential rise in equity risk premium can drive the multiples below the past three-year average in the near-term," Saion Mukherjee of Nomura said in a co-authored note with Amlan Jyoti Das on Wednesday, January 15.
Mukherjee and Das have assigned an 18.5x multiple to their December, 2026, earnings estimates, factoring in 5 per cent lower earnings compared to consensus estimates, to arrive at the December 2025 Nifty target of 23,784 in their base case scenario. This implies just 0.5 per cent upside from current levels.
In their bear case, they have set Nifty 2025 target at 21,856, assigned a December 2026 earnings multiple of 17x. This means Nifty may see 7.7 per cent downside from current levels.
Also Read
On the flipside, Nomura has assigned a bull case Nifty 2025 target of 25,712, up 8.6 per cent from current levels.
Nomura 2025 strategy
As an investment strategy, Nomura suggests investors stay highly “selective” and bet on stocks and/or sectors with relative valuation comfort.
Nomura is ‘overweight’ on Financials, Consumer staples/FMCG, Oil and gas, Pharma, Telecom, Power, Internet, and Real estate; ‘Neutral’ on information technology (IT) services and Infrastructure; and ‘underweight’ on Consumer discretionary/durables, Autos, Capital goods, Defence, Cement, Hospitals, and Metals.
Reasons for Nomura Nifty 2025 target:
Global Uncertainty: US strong, China weak
According to analysts at Nomura, the US could record a gross domestic product (GDP) growth rate of 2.8 per cent for CY-2024, higher than initial estimates of 1.3 per cent growth. With a strong labour market, the expectations of aggressive US Fed rate cuts have receded.
On the contrary, the growth expectations in China remain bearish as the structural issues in the country’s property market, sustained geopolitical tensions, and the likely disruptions on account of higher tariffs by the US may affect the bazooka stimulus.
Similarly, while Japan is expected to remain on the recovery path with the rise in policy rates, the Euro zone is projected to record slower.
India Economy Slowing:
After a poor 5.4 per cent GDP growth in Q2FY25, analysts, on average, expect Indian economy’s growth from the lows. Nomura, however, believes there are rising concerns that the strength of the recovery may just be moderate. The brokerage, thus, anticipates growth to surprise on the downside, relative to current Street expectations, and estimates higher policy rate cuts of around 100bps in 2025.
Earnings Slowdown:
India Inc’s earnings growth slowed down during the current financial year. In H1FY25, earnings for BSE 200 companies, coupled with those under Nomura’s coverage, slowed down to 4.5 per cent year-on-year.
Going ahead, the Japan based brokerage firm expects this slowdown to persist in H2FY25 led by a likely decline in earnings for Banks, NBFCs, Autos, Cement, Oil and Gas, and Capital goods in H2FY25.
Notably, the corporate earnings have been strong since FY20 a recorded CAGR of 23.5 per cent for BSE200+ earnings over FY19-24 vs mid-single digit average PAT growth over FY14-19.
The corporate earnings to GDP ratio, also, likely touched a peak of 12.2 per cent in FY24 vs a peak of 12.7 per cent in FY08.
Going ahead, earnings growth is estimated to rise to 17.4 per cent in FY26 and 15.3 per cent Y-o-Y in FY27, based on consensus estimates. The key drivers for earnings growth over FY25-27 are expected to be Banks, Oil and Gas, Metals, IT Services, Autos, NBFCs, Telecom, and Power/Utilities.,
FII, DII Flows May Weaken:
As per Nomura, a long period of low returns may drive domestic investors away from riskier bets like equities and towards safer investment options like Fixed Deposits.
Historically, the total equity inflows into mutual funds have had a strong correlation with excess market returns, which is the difference in the equity return over the past one year and the fixed deposit rates.
"Therefore, domestic flows may not be supportive of market valuations in case of a longer period of negative returns," Nomura said on DII flows.
As for FIIs, Nomura said a slowdown in earnings growth, relatively high valuations, and a stronger US dollar, will likely have a negative impact on FII flows in the near-term.