In a significant shift in stance, the global financial services firm Nomura has turned optimistic on Indian stock markets for the year 2026. The brokerage has set a year-end target of 29,300 for the Nifty 50 index, which implies a potential upside of approximately 12% from current levels.
Basis of the Bullish Projection
Nomura's projection is grounded in valuing the benchmark index at 21 times its estimated earnings for December 2027. The firm has also prudently factored in a possible 3% downside to the prevailing consensus earnings forecasts. According to their analysis, Indian equities are expected to trade within a range of 20 to 22 times one-year forward earnings, assuming that equity risk premiums remain contained.
The firm had initially eased its valuation concerns back in May 2025, following a period of market stabilization after global tensions related to tariffs. Saion Mukherjee of Nomura explained that the current positive outlook stems from a combination of reducing geopolitical tensions, steady macroeconomic fundamentals, and a anticipated cyclical recovery in both economic activity and corporate profitability.
Drivers of Market Confidence
Nomura highlights that government policies aimed at boosting domestic growth, enhancing self-reliance, and implementing structural reforms are likely to further solidify market confidence. "We further expect policies to support domestic growth with a focus on self-reliance and efforts that seek to address structural issues," Mukherjee stated.
A key pillar of market strength has been robust domestic institutional and retail inflows, which have sustained high valuations and reduced the relative influence of foreign institutional investors (FIIs) in recent months. While Nomura does not predict a sharp surge in FII inflows for 2026, it anticipates a gradual increase, especially if global equity markets see a cooling-off period.
Earnings Rebound and Sectoral Preferences
The brokerage forecasts a rebound in corporate earnings for the financial year 2025-26 (FY26). This growth, expected to be in the low double-digits, is projected to be led by commodity-linked sectors such as chemicals, oil & gas, cement, and metals.
It is noteworthy that over the past year, consensus earnings expectations for FY26, FY27, and FY28 have been trimmed by 8%, 6%, and 4%, respectively. Current estimates now bake in earnings growth of 14.6% for FY27 and 13.2% for FY28.
Regarding sectoral strategy, Nomura maintains a positive stance on financials, pharmaceuticals, IT services, consumer discretionary, real estate, internet, cement, telecom, and manufacturing. The firm holds a 'Neutral' view on autos, oil & gas, and metals, while advising a more cautious approach towards consumer staples, infrastructure, capital goods, and healthcare services.
Nomura's Top Stock Picks
The firm has identified its top 20 stock ideas, which include a mix of large-cap and mid-cap companies. The list features prominent names such as:
- ICICI Bank
- Infosys
- Bajaj Finance
- Mahindra & Mahindra
- Axis Bank
- Titan Company
- UltraTech Cement
- Dr. Reddy's Laboratories
- Dixon Technologies
- Swiggy
Disclaimer: This article is for informational purposes only. The views and recommendations are those of the brokerage firm and not of the publisher. Investors are strongly advised to consult with certified experts before making any investment decisions.
