A leading domestic brokerage firm has projected a Nifty base-case target of 28,100 for December 2026, expecting Indian equity markets to transition decisively from a phase of valuation-led consolidation to an earnings-led cycle in 2026.
Key Drivers of Growth
The firm highlights several key factors that are likely to drive this growth, including earnings cycle recovery, domestic growth momentum, and the impact of reallocation from global AI trade.
Earnings Cycle Recovery
Corporate earnings are at an inflexion point, with consensus estimates indicating a significant rebound in growth. Earnings are expected to accelerate at a pace of 12–15% year-on-year over FY26–27.
Domestic Growth Momentum
India’s growth trajectory continues to show strength heading into 2026, with GDP growth forecasts for H1 FY27 revised upward to 6.7–6.8%.
Impact of Reallocation from Global AI Trade
A reversal in the global “AI trade,” with capital rotating away from heavily concentrated US mega-cap AI stocks to broader, valuation-sensitive markets, is seen as beneficial for Indian equities.
Currency Dynamics and Rupee Outlook
The rupee experienced sharp depreciation in 2025, but the firm expects a potential rebound in the currency, supported by stronger domestic growth and the RBI’s management of forex reserves.
US-India Tariff Resolution
A key global variable highlighted in the report is the resolution of elevated tariffs imposed by the United States on Indian imports, which could be a meaningful catalyst for improving FII sentiment and boosting export volumes.
Role of Domestic Liquidity and DIIs
Domestic Institutional Investors (DIIs) now act as a powerful stabilising force against intermittent foreign outflows, providing sustained liquidity and reducing the market’s dependence on global capital flows.
Key Risks and Challenges
Despite the constructive outlook, the firm cautions that certain challenges could potentially derail market performance in 2026, including delays in resolving the US–India tariff situation and further depreciation of the rupee.
5 Key Sectoral Themes for 2026
The report lays out five investment themes expected to outperform over the next 12 months, including financials, domestic consumption plays, selective cyclicals, healthcare, and a multi-cap approach.
Top 9 Stock Picks for 2026
The firm has identified nine stocks as part of its “New Year Picks 2026” framework, reflecting its preference for quality names with strong earnings visibility and alignment with structural growth drivers.
- Axis Bank
- ICICI Bank
- Maruti Suzuki
- TVS Motor
- State Bank of India (SBI)
- ITC Ltd
- Sun Pharma
- Tata Motors
- Reliance Industries
Remember, this is a perspective, not a prediction. Do your own research and consider your own risk tolerance before making any investment decisions.