Nomura has set a December 2026 target of 29,300 for India's benchmark Nifty 50, implying a potential upside of approximately 12% from current levels. The forecast, outlined by analyst Saion Mukherjee, is predicated on a cyclical rebound in economic and earnings growth, supportive domestic policies, and a stabilized macro environment.
Rationale for the Upgraded Outlook:
- Valuation Reset: Nomura dropped its valuation concerns in May 2025 after markets absorbed the U.S. tariff-related selloff. India's relative underperformance over the past year has helped normalize excessive valuation premiums.
- Improving Fundamentals: The brokerage anticipates a cyclical pickup in earnings, particularly in commodity-linked sectors, supported by calmer geopolitics and a firmer macro backdrop.
- Policy Tailwinds: Expectations for continued policy focus on growth, self-reliance, and structural reforms underpin a constructive medium-term view.
- Domestic Flow Support: Resilient domestic institutional and retail flows are seen as a key anchor for market stability.
Sector Strategy: Selective Overweights
Nomura advocates a selective, bottom-up approach, warning that "narrative-driven stocks with stretched valuations may deliver no returns."
- Overweight: Financials, Consumer Discretionary, Real Estate, Internet, Cement, Telecom, Manufacturing. It specifically favors Commercial Vehicles, Pharma, IT, and Non-Bank Lenders.
- Cautious: Consumer Staples, Infrastructure, Capital Goods, Healthcare Services.
- Neutral: Autos.
Top Picks for 2026:
The firm highlighted a blend of large-cap leaders across sectors:
- ICICI Bank
- Axis Bank
- Infosys
- UltraTech Cement
- Mahindra & Mahindra
- Bajaj Finance
Key Risks to the Forecast:
Nomura flagged external threats that could derail the trajectory:
- A rise in global risk premiums.
- Spikes in commodity prices.
- Geopolitical or macroeconomic shocks.
Broader Context:
Nomura's bullish 2026 call aligns with similar forecasts from HSBC and J.P. Morgan. The Nifty 50 and Sensex recently scaled record highs after a 14-month gap, buoyed by improving earnings, steadier valuations, strong domestic inflows, and robust economic growth.
Bottom Line:
Nomura’s outlook suggests that the Indian equity market is transitioning from a valuation-driven rally to an earnings-driven phase over the next two years. The projected 12% upside to ~29,300 by end-2026 is a measured forecast, reflecting confidence in a cyclical recovery but also acknowledging elevated starting levels and external risks. The emphasis on stock selection over broad momentum indicates expectations of a more differentiated market where fundamental execution will be critical for outperformance.