Surendra Goyal of Citi expects the earnings growth trajectory to improve in 2026, led by financials. Bottom-up estimates also point to a recovery across consumer and industrial sectors.
He believes the risk-reward for equities remains favourable, which should support returns for the Nifty and MSCI India.
Relative valuations, the possibility of a US trade deal, and a broadening of global equity participation beyond AI-driven stocks are seen as additional positives.
In 2025, foreign investors pulled out $18 billion, while domestic institutional investors added $90 billion. Primary market fund-raising crossed $30 billion during the year. Sector-wise, telecom, commodities and banks outperformed, while IT stocks lagged.
Citi has set a December 2026 Nifty target of 28,500, implying an upside of about 10%.
Mahesh Nandurkar of Jefferies said earnings per share growth will remain the most important driver of stock performance in CY26. His 30-stock model portfolio is expected to deliver EPS growth of 21% in FY27, compared with 16% for MSCI India.
He added that paying a modest premium for visible growth makes sense. While the model portfolio trades at a slightly higher PE of 23x versus 22x for MSCI India, it has a lower PEG ratio of 1.1x compared with 1.4x.
Jefferies' top picks for CY26 include Axis Bank, Bharti Airtel, Cholamandalam Investment and Finance Company, TVS Motor Company, Mahindra And Mahindra , Ambuja Cements, Lodha Developers and Godrej Properties, Max Healthcare, JSW Energy and GMR Airports.
Ridham Desai of Morgan Stanley expects an action-packed quarter ahead. He sees earnings beating expectations, the RBI continuing with deregulation, more reforms from the government and the possibility of a trade deal with the US.
Morgan Stanley remains overweight on lenders and discretionary consumption, which are expected to benefit from India's relative outperformance.
