Positive on budget, Nomura ups Nifty target to 12,900 by March

The next few days also the markets tanked wiping out the entire gains since the election results were announced on May 23, spooked by the super-rich tax and the plans to tax foreign investors coming in as overseas trusts.

"We expect the market to get valuation support from lower bond yields. Further steps taken by government/RBI to infuse liquidity into NBFCs should allay concerns of a deeper slowdown," the brokerage said Tuesday in a note.

It said the earlier target was based on an earnings multiple of 16 times on the FY21 earnings, which is now being increased to 17 times due to which the target on the benchmark is being revised up, it said.

The NSE's benchmark gained 0.64 percent to close at 11,662.60 points at the end of the trade Tuesday.

The brokerage sees the budget as "fiscally prudent" with its focus on fiscal prudence and attempts to lay the foundation for investment-led growth.

The government has budgeted for increased receipts despite cuts in income tax, corporate tax and GST, it said, adding it hopes higher disinvestment receipts, dividend income and indirect tax excluding GST like higher excise/cess on petroleum products and customs duties to help.

"We do see a possibility of slippages in projected income tax and GST collection," it said, adding the commitment to a lower fiscal deficit, intent to borrow internationally,  thrust on disinvestment, proposal to expand foreign holding limits and steps taken to address NBFC crisis should help lower the cost of capital Nomura is overweight on banks,insurers, and infra and healthcare players, and underweight on auto, consumer staples, cement and software companies and attributed the overweight on infra to the increased government thrust on the sector.