After a lacklustre performance in recent years, Indian large-cap stocks could see a comeback in 2025, driven by attractive valuations resulting from foreign investor selling and the potential for strong corporate earnings.
A CNBC-TV18 poll which gathered insights from 61 fund managers, high-net-worth individuals, and market dealers indicated a strong leaning in favour of large-cap stocks for 2025.
Further, according to the latest report by Canara Robeco Mutual Fund, the fall of the Nifty 100 index- which tracks the performance of India’s 100 largest companies by market capitalisation- to near all-time lows creates a significant opportunity for mean reversion, where valuations return to their historical norms.
Further, the report says, that the fact that these stocks represent leaders in their respective industries, they are more resilient and more capable of navigating global market volatility, as well as capitalising on long-term economic trends.
Why valuations are favouring large caps?
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, recently said that FIIs sold equities worth Rs 1.19 lakh crore in 2024, even though they invested nearly Rs 1.21 lakh crore through primary markets, especially when the year saw a surfeit of initial share sales.
According to Bloomberg, global funds offloaded over $750 million worth of stocks in 2024, exacerbated by heavy selling in October and November.
One of the major reasons behind the heavy selling was the premium valuations of Indian stocks in the wake of slowing earnings growth.
Source: Moneycontrol
In September, the Nifty 50 index, which comprises the top 50 equity stocks, was trading at a price-to-earnings ratio of 24.7x, which was in line with its 5-year average, but higher than the 10-year average of 23.4x.
Currently, Nifty 50 is trading at a PE ratio of 21.9, whereas Nifty 100 is trading at a PE ratio of 22.4.
Nimesh Chandan, chief investment officer at Bajaj Finserv, which manages over $1.8 billion in assets, told CNBC,
Large caps have borne the brunt of selling by foreign investors, and valuations are attractive.
The Canara Robeco report added, “The domestic large-cap universe currently stands near its 3-year historical average while being undervalued against the Nifty 500 broader market index. This may open an opportunity for the large-cap space to be favourable for the upcoming period as per our belief.”
5 large-cap stocks that analysts are bullish on
Axis Bank share price target
Axis Bank is covered by 37 brokers, who have assigned an average rating of 4.33 out of 5.
The stock’s average target price is ₹1,349, suggesting a potential upside of 26% from its current price of ₹1,073.
Hindustan Unilever (HUL) share price target
Hindustan Unilever is tracked by 35 brokers, with an impressive average rating of 4.67.
Analysts have set an average target price of ₹2,934, indicating a 26% upside from the current price of ₹2,321.
IndusInd Bank share price target
IndusInd Bank has an average rating of 4.69 from 34 brokers.
The stock has an average target price of ₹1,630, reflecting a massive 67% upside from its current market price of ₹977.
Tata Motors share price target
Tata Motors has earned an average rating of 4.14 from 31 brokers.
Analysts project an average target price of ₹1,052, highlighting a potential upside of nearly 40% from the current price of ₹749.
State Bank of India (SBI) share price target
SBI is covered by 30 brokers, with an average rating of 4.75.
The average target price for the stock is ₹1,010, offering a potential upside of 27% from its current market price of ₹793.
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