India's Equity Markets Poised for Rebound
India's stock market is expected to make a significant comeback in 2026, with the Nifty potentially reaching the 30,000 mark. This prediction is based on a strong earnings recovery, according to Aditya Suresh, Managing Director and Head of India Research at Macquarie Capital.
A Shift from Cautious to Optimistic
Suresh explained that Macquarie's cautious stance at the beginning of the year was due to anticipated earnings cuts, which have since materialized. However, the outlook for fiscal years 2027 and 2028 is much brighter, with the firm's bottom-up analysis pointing towards a return to mid-teens EPS growth.
Key Sectors Driving Growth
The projected recovery is driven by robust expectations across key sectors, including financials, IT, and electronics manufacturing services (EMS). In financials, which make up about 30% of the MSCI India index, the firm anticipates high-teens credit growth and potential margin expansion.
- Financials: High-teens credit growth and potential margin expansion
- IT: Optimistic revenue and margin growth
- EMS: Favourable combination of growth, returns, and free cash flow generation
Attracting Foreign Investors
This earnings comeback is expected to attract foreign institutional investors (FIIs) back into the Indian market. Suresh noted that a combination of returning foreign capital and resilient domestic liquidity could lead to further multiple expansion despite high starting valuations.
Sector-Specific Views
Macquarie remains optimistic on select names in the EMS space, such as Dixon and Avalon Technologies. In the financials universe, the firm prefers large private banks like HDFC Bank and ICICI Bank, followed by specific non-banking financial companies (NBFCs) and insurance companies.
The Indian stock market is expected to continue its growth trajectory, driven by a strong earnings recovery and robust expectations across key sectors. With the Nifty potentially reaching the 30,000 mark, it's an exciting time for investors in the Indian market.