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Nifty is likely to meet a 12-month target of 26,820, revised higher from earlier target of 26,398, market analysts said on Friday, amid high expectations for a festival season revival, supported by favourable monsoon conditions, and a strong infrastructure spending push by the government. 

In its report, financial services organisations Prabhudas Lilladher revised Nifty’s EPS (earnings per share) projections as the market continues to perform well.

The report valued Nifty at 15-year average PE (19 times) with March 26 EPS of Rs 1,411 and arrived at 12-month target of 26,820, revised higher from earlier target of 26,398.

Currently, Nifty is trading at 18.9 times its one-year forward EPS, which is almost on par with its 15-year average of 19 times.

In a continuous bull case scenario, the report valued Nifty at PE of 20.2x and arrived at a target of 28,564.

In a bear case scenario, Nifty may trade at a 10 per cent discount to a long-period average with a target of 24,407, the report mentioned.

Since July 11, Nifty has delivered a return of 1.6 per cent despite rising volatility amid deteriorating geopolitical situation as Indian markets were supported.

Markets have experienced extreme volatility due to the Japanese carry trade and geopolitical uncertainty.

However, strong DII inflows continue to drive the markets, even as FII selling has subsided.

Additionally, the increasing likelihood of an interest rate cut by the FED and overall inflation dropping to below 4 per cent raises hopes for a potential repo rate cut in the second half of FY25.

Liquidity remains robust, with domestic inflows significantly surpassing FII flows, providing a buffer for the markets. The report anticipated a strong festival season demand, a rural revival, and potential interest rate cuts.

Given the high valuations in some growth sectors, the report expects a shift towards defensive sectors such as consumer goods, durables, building materials, IT services, pharmaceuticals, and telecom.