Nifty about 25,000: Is earnings strong enough to justify valuations? | Einsmark news

India’s benchmark Nifty 50 index is closer to the reclaim of psychologically important 25,000 mark, which is blown by strong domestic liquidity, policy optimism and the improvement of macro indicators. After the index has risen almost 5 percent so far, the index continues to attract investors’ attention, even in the midst of global uncertainties. However, the question remains: Is this optimism supported by underlying growth in earnings? Macroeconomic Optimism-Boei Market Confidence In a recent report, Incred Equities of Brokerage House pointed out that although high-frequency macro data shows a mixed picture for both domestic and export-oriented sectors, the recent government policies have revived for a broader economic revival. Factors such as a stronger -than -expected monsoon, relieving fuel prices and expectations of a higher repo rate reduced by the Reserve Bank of India, began to increase the sentiment of the consumer. The broker emphasized that rural demand in particular is likely to benefit from favorable weather and price stability, while urban consumption must facilitate relief from inflation. The earnings momentum delays, valuations extend according to Incred, the Nifty-50 businesses reported a modest 5 percent growth in the year-to-year growth in profit after tax (PAT) for the March 2025 quarter, which was short of Bloomberg Consensus by about 1 percent. This delay comes in stark contrast to developed markets such as the US, which have strong earnings. It noted that the growth of EBITDA, excluding BFSI, stood on a healthy 20 percent, which is largely driven by retail, telecommunications and capital goods sectors. However, sectors such as cement have still struggled. The FY26 earnings per share (EPS) forecast for the NIFTY-50 was revised by 2 percent, with that, consumer discresionary, industries and BFSI leading downgrades. Referring to improving macro fundamentals-as the potential for an above normal monsoon and falling price of crude oil-increased its likelihood of the bull from 25 percent to 35 percent. As a result, he revised his mixed Nifty-50 target slightly higher to 25,142 (from 24.280 earlier) by March 2026, indicating a limited 1 percent of current levels. However, the broker warned that although valuations have returned to their ten-year average, short-term downturns for short-term and cautious management commentary are still the most important problems. It further added that with the recent rally that Nifty’s valuation lifts, especially in the small and mid-cap space, investors should become more selective. The Nifty Smallcap-100 index is now trading at a premium to the wider Nifty-50, which is careful about protracted valuations. Incred added Camline Fine Sciences to the list of high conviction, the profits in Adani ports and Cipla, and the coverage on middle-sized banks with an overweight rating, given their improved liquidity and cost advantage. External support and risks on the horizon have meanwhile increased brokers like Goldman Sachs and Jefferies their nice targets to the 25,000-25 500 series, citing India’s stable macro environment, manageable inflation and growing global fund flow. Domestic investors also support the rally with SIP inflow that achieves a record of £ 21,000 in May 2025. However, disbelief has warned that there are still multiple risks. The upcoming US Federal Reserve Policy decision on June 18 could cause the global sentiment to disappear, while rising geopolitical tensions and slow recovery of rural demand could act as spoilers. Rising input costs can also damage corporate margins, leading to possible valuation corrections if the FY26 earnings disappoint. In general, the Nifty’s approach to the 25,000 level seems to be more driven by optimism and liquidity than robust expansion of earnings. Incred believes that although the broader macro environment offers some wind winds, protracted valuations, subdued earnings upgrades and the global wind winds temper the sustainability of the rally. For investors, the focus must now go to picking down-to-under, with an emphasis on quality, earnings visibility and valuation, as the market enters a more mature phase of its bull run. Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, and not of currency. We advise investors to check with certified experts before making investment decisions.