Brokerage firm Nomura has reiterated its optimistic outlook for the Indian stock market, maintaining its Nifty 50 index target at 25,900 by March 2027. This projection suggests a potential upside of 7.22% from the Nifty's closing level of 24,154.90 recorded on Tuesday, August 18, 2026.
According to Nomura's latest India equity strategy note, the Indian market has recently lagged behind its global counterparts. The Nifty is currently trading at 18.1 times its one-year forward earnings, placing it near the lower end of its typical 18-22 times valuation range observed over the past four years. This valuation point supports the firm's continued confidence in the market's growth potential.
Strategic Sector Preferences
Nomura's investment approach emphasizes a bottom-up, stock-specific strategy. The brokerage firm holds a constructive view on several key sectors, citing attractive valuations and robust growth prospects:
- Auto Ancillaries: Expected to benefit from ongoing strength in the automotive sector.
- Engineering and Manufacturing: Poised for growth driven by industrial expansion.
- Pharmaceuticals: Continues to offer stable returns and innovation.
- Financials: Supported by what Nomura views as appealing valuations.
- IT Services: Also seen as having attractive valuations, with additional tailwinds from AI adoption.
Key Investment Themes Identified
The firm's sector stance is underpinned by several overarching themes:
- Established Exporters: A preference for companies with proven credentials in export markets, including auto components, pharmaceuticals, and power equipment manufacturers.
- Data Center and Power Infrastructure: Significant structural tailwinds are expected from the build-out of capacity in these essential infrastructure segments.
- AI-Driven Opportunities: Indian IT services firms are anticipated to see a medium-term revenue uplift from mandates related to Artificial Intelligence implementation.
Conversely, Nomura expresses caution regarding the consumption segment, anticipating a slowdown in growth and potential margin pressures. The brokerage also notes that limited government support to industries, due to prevailing fiscal constraints, may restrict policy-driven stimulus measures.
Corporate Earnings Performance
Nomura observed that corporate earnings for the first quarter of fiscal year 2027 (1QFY27) exceeded Street expectations. For Nifty 50 companies, year-on-year earnings growth stood at 4%, surpassing consensus estimates by 1%. However, the headline figure was influenced by oil price movements and one-off items from major companies like Reliance Industries and ONGC. Excluding these effects, Nomura estimates the underlying earnings growth to be in the low teens, which it considers a more accurate reflection of corporate India's operational momentum.
Earnings Estimates and Risks
Year-to-date, Bloomberg consensus earnings estimates for the BSE 200+ universe have seen a 3.7% downward revision for FY27, while FY28 estimates have remained largely stable. Despite this, Nomura asserts that corporate earnings momentum remains resilient, bolstered by strong cyclical tailwinds such as tax cuts and monetary easing, including liquidity injections and lower interest rates.
The report also highlights that India’s corporate earnings-to-GDP ratio is currently elevated. Sustaining earnings growth above nominal GDP growth, in Nomura's view, hinges on a significant acceleration in the investment cycle and domestic manufacturing activity. Potential downside risks to this outlook include sustainably elevated crude oil prices and geopolitical tensions, which could exert pressure on profitability and delay a recovery in the investment cycle.