Nomura raises Nifty March 2026 target to 26,140 on supportive macros

Business Standard

2 days ago

Nomura on Nifty50: Japan-based brokerage firm Nomura has raised its Nifty50 target for March 2026 to 26,140, up from its previous projection of 24,970, citing favourable domestic macroeconomic conditions and stable equity valuations despite persistent risks to corporate earnings growth.
The revised target implies a potential upside of about 6 per cent from current levels. Nomura's analysts believe the market is being supported by falling bond yields, steady domestic inflows, and relatively resilient performance in Indian equities, even as earnings estimates for FY26 and FY27 have been cut.
'We assess the fair value range for the Nifty at 18-24x one-year forward earnings, which implies upside/downside of 24 per cent/12 per cent from current levels. Assuming benign risk premium and low yields, we raise the target valuation multiple to 21x (from 19.5x previously),' Saion Mukherjee and Amlan Jyoti Das, research analysts at Nomura said, in a note. 'Based on 21x P/E on FY27F earnings, we arrive at our March 2026 Nifty target of 26,140 (versus 24,970 previously), suggesting potential upside of 6 per cent from current levels.'
Earnings cuts weigh on outlook
Despite an earnings season with more beats than misses, Nomura analysts flagged a deceleration in overall growth. The brokerage reviewed Q4FY25 results from 223 companies (including the BSE 200 and its coverage universe), where aggregate profit after tax rose 10 per cent Y-o-Y—6 per cent ahead of consensus—but earnings expectations continue to trend lower.
Consensus estimates for FY26 and FY27 earnings have been revised down by 2.3 per cent and 1.4 per cent, respectively, since March 2025. Compared to September 2024, the downgrades are deeper—7.6 per cent and 6.3 per cent, respectively. Nomura expects further earnings cuts of 4–8 per cent for FY27.
'The corporate earnings-to-GDP ratio is already close to its peak,' Nomura noted. 'Significant outperformance to nominal GDP growth appears unlikely in the near term.'
Risks to earnings include a weak investment cycle, fiscal consolidation, reduced household financial savings, and sluggish export demand. However, these pressures may be partially offset by softer oil prices, easing inflation, and declining interest rates.
Valuation holds up amid global volatility
Indian equities are trading at 20.5x one-year forward earnings, near the upper end of their three-year range. Still, the earnings yield to bond yield spread of -1.4 per cent remains within a comfortable band, according to Nomura.
'The favourable spread is comforting and supports our positive view on market valuation,' analysts at Nomura said. 'Even with trade-related global uncertainties and policy risks, equity risk premiums remain low.'
Sector preferences tilt to domestic plays, consumption
Nomura has shifted its sectoral bias in favour of domestic-oriented stocks and consumption themes over export-led and investment-driven sectors.
'We prefer domestic-focused sectors to exporters given global uncertainties. Within that, consumption themes look more promising due to tailwinds from low inflation, rate cuts, and fiscal support such as income tax reductions,' the report said.
The brokerage is overweight on financials, consumer staples, autos, discretionary spending, oil and gas, power, telecom, internet, and real estate. It also favours select domestic healthcare plays and stocks linked to the supply-chain relocation trend—particularly in autos, chemicals, and electronics.
Conversely, Nomura remains cautious on IT services, industrials, cement, and metals—sectors tied to capital expenditure cycles and global demand. It also flagged US tariff risks as a near-term headwind for Indian pharma exports, though it sees any correction as a buying opportunity.
'In our view, the investment cycle may be delayed due to global uncertainty,' it said. 'But selective opportunities still exist, particularly in power sector-related industrials.'