The Indian stock market benchmark indices, Sensex and Nifty 50, continued their upside momentum and scaled record high levels on Friday led by a rally in IT and banking stocks. All the top IT stocks, Tata Consultancy Services (TCS), Infosys, HCL Technologies and Wipro, were among the top gainers on the Nifty 50 index as sentiment improved after upbeat TCS Q1 results.

Nifty 50 has jumped over 5% in the last one month and is up more than 12% year-to-date (YTD). The stock market currently seems to be consolidating and is sweetly poised given several factors, according to brokerage firm Prabhudas Lilladher.

It believes monsoons have turned normal last week which is likely to tame inflation and boost rural demand, commodity prices are range bound with limited scope of an upward movement in near term and rising hopes of interest rate cuts in later part of the year.

Meanwhile, the Indian stock market is looking forward to the first budget of Modi 3.0 in an environment of strong economy and fiscal condition, ₹2.1 lakh crore RBI dividend cushion and normal monsoons, Prabhudas Lilladher said in a report.

It expects renewed focus of the government on Infra and capex, Rural and Bottom end focus and some concessions to tax paying class, which might provide further boost to the economy.

Nifty is currently trading at 18.5x 1-year forward EPS (earnings per share), which is at 3.6% discount to 15-year average of 19.2x.

In its base case, Prabhudas Lilladher values Nifty at 3% discount to 15-year average PE (18.6x) with March 2026 EPS of ₹1,417. Thus, it raised the 12-month Nifty target to 26,398 from 25,816 earlier.

In its bull case, the brokerage firm values Nifty at 5% premium to 15-year average PE 20x and arrives at a target of 28,575 from 27,102 earlier. It believes in the bear case, Nifty can trade at 10% discount to LPA with a target of 24,493 as against a target of 23,235 earlier.

It believes Capital Goods, Infra, Logistics/ Ports, EMS, Hospitals, Tourism, Auto, New Energy, E-com and Telecom are potent themes to play, although one needs to be cognizant of valuations.

“We believe normal monsoons and some concessions for rural and middle class will revive demand in sectors like FMCG, Durables, and Auto, retail and building materials,” Prabhudas Lilladher said.

The brokerage said it believes Capital Goods (govt capex and PLI), Travel, Hospitals, AMC’s, Telecom seems well placed for sustained growth in coming quarters as well. Metals are likely to report higher profits on a low base while cement margins should recover in H2.

“Banks are likely to see NIM compression in coming quarters as well. Wire and cable companies are on a strong wicket. Rural demand and expected budget sops will boost demand for staples, durables, auto 2W, housing etc. we expect gradual recovery to set in QSR, Apparel, Jewellery, travel etc- more from 2H25 onwards,” it said.

Model Portfolio Changes

In its model portfolio, Prabhudas Lilladher cut weights on HDFC Bank, Kotak Mahindra Bank and Cipla. It has removed Bajaj Finance and Jindal Steel & Power Ltd from the model portfolio. It has increased weight behind ITC, Titan Company, Axis Bank, HDFC Asset Management Company and Ambuja Cement. It remains overweight on cement, auto, consumer, capital goods, healthcare, telecom sectors and Reliance Industries.

High Conviction Picks

In the list of its high conviction stock picks, the brokerage firm said it is adding Ambuja Cement, Titan Company, Apar Industries and HDFC AMC. It is removing Sunteck Realty, BEML, Can Fin Homes and Astral post recent run up in stock prices.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.