Nomura forecasts India's benchmark Nifty 50 index will rise to 29,300 by the end of 2026, representing an upside of about 12% from current levels, driven by a cyclical economic pickup and stronger earnings growth amid supportive policies.

Analyst Saion Mukherjee stated in a note on Tuesday that the brokerage has moved past its earlier valuation concerns, citing calmer geopolitics, a firmer macro backdrop, and signs of a cyclical recovery as reasons to justify higher valuations. This outlook follows recent record highs in the Nifty and Sensex, supported by improving earnings, steady valuations, resilient domestic inflows, and robust economic growth.

Key Drivers of the Positive View

• Valuation Normalisation: Nomura notes that India's relative underperformance over the past year has helped high valuation premiums normalise.
• Domestic Flow Support: Strong local investor flows are seen as a key anchor for market stability.
• Policy Backdrop: Ongoing policy support aimed at growth, self-reliance, and structural reforms is expected to maintain a constructive medium-term outlook.

Sector Preferences and Top Picks

The brokerage advocates a selective, bottom-up approach, cautioning that "narrative-driven stocks with stretched valuations may deliver no returns."

• Overweight Sectors: Financials, Consumer Discretionary, Real Estate, Internet, Cement, Telecom, and Manufacturing. It specifically favors commercial vehicles, pharma, IT, and non-bank lenders within this mix.
• Cautious or Neutral: Consumer Staples, Infrastructure, Capital Goods, Healthcare Services, and Autos.

Top Stock Picks for 2026:
ICICI Bank, Axis Bank, Infosys, UltraTech Cement, Mahindra & Mahindra, and Bajaj Finance.

Risks to the Outlook

Nomura highlighted potential global threats that could disrupt the trajectory, including rising risk premiums, commodity price spikes, and unforeseen geopolitical or macroeconomic shocks.