After rebounding in March, Indian equities witnessed renewed selling pressure in April, dragged down by escalating fears of a global trade war. According to Axis Securities, both the Nifty and Sensex declined nearly 5 percent during the month, reversing the optimism seen earlier. The immediate trigger for the correction was the imposition of reciprocal tariffs by the US on imports from over 180 countries — including key economic partners like China and India.

US President Donald Trump’s move on April 2 aimed to protect American manufacturing but prompted swift retaliation from China, which imposed a 34 percent tariff on US goods. Axis Securities said the tit-for-tat measures between the world’s two largest economies had far-reaching implications for global financial markets and investor sentiment.

“The escalation of trade tensions may not be a one-off event. Instead, it could mark the beginning of a prolonged trade war that affects global growth trajectories,” the brokerage cautioned.

Valuations Still Reasonable; Largecaps Remain Attractive

Despite the correction, Nifty valuations have remained within a reasonable range. Axis Securities noted that the index is currently trading at 19x 12-month forward earnings — slightly above its 5-year average of 18.8x. While this suggests the broader market is not excessively priced, the brokerage said the real value lies in largecap stocks, where the margin of safety is more visible than in mid and smallcaps.

“Valuations appear more favourable for largecaps compared to the broader market. We believe investors should focus on quality names, market leaders, and monopolies with strong earnings visibility,” Axis Securities added.

Strategy: Sector Rotation Key in Navigating Uncertainty

In its April outlook, Axis Securities stressed that macroeconomic risks — including uncertainty around trade policy, the trajectory of US bond yields, and the strength of the dollar — will continue to influence market direction in the short term. The brokerage expects market consolidation to persist, with a narrow breadth of market participation.

In response, Axis Securities has adopted a sector rotation strategy. It recommends tilting portfolios towards domestic-facing sectors such as private sector banks, telecom, consumption, hospitals, and interest-rate sensitive industries. These segments are seen as relatively insulated from the global trade conflict and are expected to benefit from robust domestic demand and policy tailwinds.

“Export-oriented sectors, on the other hand, will need to navigate through uncertainty stemming from global developments and may remain in a wait-and-watch mode,” it said.

Nifty Target Maintained at 24,600; 14% Earnings CAGR Seen

Axis Securities has maintained its base case Nifty target of 24,600 for December 2025, valuing the index at 19x FY26 projected earnings. This is backed by the brokerage’s expectation of a 14 percent compound annual earnings growth rate (CAGR) over FY23–27, with financials playing a major role in driving this momentum.

The brokerage remains optimistic about India’s economic outlook, supported by a favourable policy environment, rising capital expenditure, and strong credit growth driven by the Union Budget. “India remains a stable haven amidst global volatility,” Axis Securities said, adding that Indian equities are well-positioned to deliver double-digit returns over the next 2–3 years.

Bull and Bear Cases: 27,000 and 22,000 Scenarios

In its bull case, Axis Securities values Nifty at 21x earnings, resulting in a target of 27,000. This scenario assumes a Goldilocks environment — including a successful soft landing for the US economy, political stability in India, a revival in private capex, and strong global liquidity.

In contrast, the bear case pegs the Nifty at 17x earnings, translating into a target of 22,000. This assumes a policy shift under Trump’s regime, persistent inflation in developed markets, and currency and commodity price volatility, which could impact export-oriented sectors and drag down market valuations.

Stock Picks Aligned with Theme of Resilience

In line with its strategy, Axis Securities has identified a list of preferred stocks with strong fundamentals, leadership in their respective domains, and domestic growth drivers. These include:

HDFC Bank, ICICI Bank, State Bank of India, Max Healthcare, Lupin, Hero MotoCorp, Trent Ltd, Indian Hotels, Bharti Airtel, Prestige Estates, APL Apollo Tubes, Kalpataru Projects, Varun Beverages, Cholamandalam Investment and Finance, and Dalmia Bharat.

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.