Global brokerage firm CLSA has delivered an optimistic forecast for Indian equities, predicting approximately 16% upside potential by December 2026. The analysis suggests that Indian markets are emerging from an extended adjustment period and building a more stable profitability foundation for the coming years.
Market Reset Creates New Opportunities
According to CLSA's research, the past 14 months have witnessed a significant reset in market expectations. GDP growth assumptions were revised downward, earnings-per-share projections moderated from elevated levels, and the Indian currency experienced weakening pressure. Despite these adjustments, the brokerage believes the market has reached an inflection point where profitability appears more predictable and sustainable.
The improved market stability stems from multiple factors, including enhanced tolerance for foreign fund outflows and a transition away from peak equity supply conditions. CLSA noted that the heavy equity supply characterizing 2025, marked by record IPOs and secondary placements, has likely peaked, thereby easing liquidity pressures moving forward.
India's Safe Haven Status in AI-Driven Markets
CLSA highlighted an intriguing trend in global investor behavior, noting that India is currently benefiting from its perception as a safe haven in a global environment dominated by artificial intelligence-driven market sentiment. This status isn't solely dependent on domestic fundamentals but reflects India's relative stability amid global technological disruptions.
Interestingly, while CLSA's own exposure to Indian equities has decreased compared to the start of the year, their regression models continue to indicate substantial growth potential. The brokerage also observed that India's valuation premium has moderated, with the country's forward price-to-earnings multiple now trading at a lower premium to emerging markets, while the price-to-book ratio has become cheaper than Taiwan.
13 High-Conviction Stock Picks with Massive Potential
In their latest research note, CLSA identified 13 stocks that could deliver returns of up to 58% over the next 12 months. Described as "high-conviction Tiger picks," these companies represent the investment ideas that CLSA analysts are most confident about.
The complete list includes:
- Eternal
- NHPC
- Apollo Tyres
- Avenue Supermarts (DMart)
- Indus Towers
- ONGC
- Persistent Systems
- DLF
- Power Finance Corporation (PFC)
- REC
- Tech Mahindra
- UltraTech Cement
- Varun Beverages
CLSA acknowledged that some of these stocks trade at elevated valuations but emphasized they are backed by equally strong growth trajectories that justify their current pricing.
Standout Performers with Explosive Growth
Eternal represents one of the most promising picks, with CLSA maintaining their high-conviction Out-Perform recommendation and increasing their target price from ₹450 to ₹483. The brokerage expects Eternal's EPS to surge by 103% in FY26, 405% in FY27, and 95% in FY28, driven by rapid scale-up and category expansion.
NHPC emerges as another standout selection, with CLSA highlighting its dominant 15% share of India's hydro capacity and 50% share in projects under construction. Analyst Bharat Parekh anticipates strong EPS expansion over FY25–27, supported by accelerated renewable energy execution. CLSA forecasts 69% EPS growth and a 419-basis-point ROE improvement through FY27.
The brokerage believes that the award of India's largest hydro project in the third quarter of FY26, along with seven additional projects over FY25–27, should crystallize NHPC's estimated 2.6x decadal growth in renewable energy execution.
Other Notable Recommendations
Apollo Tyres received a target price increase to ₹650 from ₹586, supported by expected 61–63 basis point improvement in FY26–27 EBITDA margins due to favorable raw material prices.
DMart continues to embody the "everyday low value" proposition, while DMart Ready enhances its appeal to wealthier customers seeking better convenience without sacrificing affordability.
DLF is positioned as a long-term beneficiary of India's urbanization cycle, offering exposure to rising demand for residential and mixed-use projects across the country.
CLSA concludes that a combination of stabilizing valuations, easing supply pressures, and stock-specific earnings strength positions India for a constructive medium-term setup heading into 2026, making current market conditions favorable for strategic investment in their high-conviction picks.
