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India’s benchmark Nifty 50 index may be entering a phase of muted returns, with global brokerage Bernstein warning that elevated valuations and a potential slowdown in earnings growth could limit upside over the next two years.
In its latest note on Indian equities, Bernstein estimates that the Nifty is likely to deliver returns of around 7.6 per cent by the end of 2026, signalling a moderation after the strong rallies seen in recent years.
The brokerage cautioned that downside risks remain evenly balanced. If earnings per share (EPS) growth slows to about 8 per cent annually over the next two years and valuation multiples contract to 18.5 times, the Nifty could slide to around 24,800 implying a potential decline of roughly 5 per cent from current levels.
Bernstein said the primary concern for investors is the market’s stretched valuation profile. While corporate earnings continue to grow, the brokerage believes that profit expansion may not be strong enough to justify existing price multiples, making the market vulnerable to valuation-led corrections.
Domestic liquidity and steady earnings have so far supported Indian equities despite global uncertainties, including geopolitical tensions and slowing growth in major economies. However, Bernstein warned that these supportive factors may not be sufficient to drive strong, broad-based gains over the medium term.
The report advised investors to temper expectations and adopt a more selective approach, focusing on companies with strong balance sheets, consistent cash flows, and pricing power rather than relying solely on index-level returns.
With valuations remaining elevated and earnings growth expected to normalise, Bernstein said the Nifty is likely to deliver moderate rather than spectacular returns through the end of 2026.
In its latest note on Indian equities, Bernstein estimates that the Nifty is likely to deliver returns of around 7.6 per cent by the end of 2026, signalling a moderation after the strong rallies seen in recent years.
The brokerage cautioned that downside risks remain evenly balanced. If earnings per share (EPS) growth slows to about 8 per cent annually over the next two years and valuation multiples contract to 18.5 times, the Nifty could slide to around 24,800 implying a potential decline of roughly 5 per cent from current levels.
Bernstein said the primary concern for investors is the market’s stretched valuation profile. While corporate earnings continue to grow, the brokerage believes that profit expansion may not be strong enough to justify existing price multiples, making the market vulnerable to valuation-led corrections.
Domestic liquidity and steady earnings have so far supported Indian equities despite global uncertainties, including geopolitical tensions and slowing growth in major economies. However, Bernstein warned that these supportive factors may not be sufficient to drive strong, broad-based gains over the medium term.
The report advised investors to temper expectations and adopt a more selective approach, focusing on companies with strong balance sheets, consistent cash flows, and pricing power rather than relying solely on index-level returns.
With valuations remaining elevated and earnings growth expected to normalise, Bernstein said the Nifty is likely to deliver moderate rather than spectacular returns through the end of 2026.
