In the base case scenario, the brokerage has assigned a target of 29,120, underpinned by expectations of robust earnings growth and supportive macroeconomic fundamentals.
In a detailed market outlook report, Shrikant Chouhan, Head of Equity Research at Kotak Securities, noted that the base case projection is derived by valuing the Nifty at 20x FY28 estimated earnings per share (EPS) of Rs 1,456, in line with the index’s 10-year average price-to-earnings ratio.
The bull case scenario assumes a 10% premium to this historical average, arriving at a multiple of 22x, which translates to the December 2026 target of 32,032.
The report forecasts Nifty earnings to grow by 8.2% in FY26E (EPS of Rs 1,077), 17.6% in FY27E (EPS of Rs 1,268), and 14.8% in FY28E (EPS of Rs 1,456). Currently, the index trades at 23.9x FY26E, 20.3x FY27E, and 17.7x FY28E earnings.
Sector preferences
Kotak has identified banking and financial services (BFSI), information technology, healthcare, and hospitality as its preferred sectors, citing broad-based earnings visibility.
“We expect the growth in net profits in FY27E to be broad-based across sectors,” Chouhan said. The brokerage highlighted that net profit growth for Nifty-50 companies, which stood at 6.6% in FY25, is expected to improve sharply in the following years.
Market outlook and flows
Kotak Securities said it maintains a constructive view on Indian equities, supported by a strengthened earnings outlook and proactive government policy action. “We hold a favorable view of the Indian market compared to our earlier stance, as the earnings outlook has strengthened amid resolute government action,” Chouhan said in the report.
While acknowledging that the Indian market has traded sideways over the past 12–15 months, the brokerage believes several earlier concerns, including elevated valuations and the risk of earnings downgrades, have largely played out, thereby reducing downside risks and improving the setup for future gains.
On the flows front, Kotak noted that Foreign Portfolio Investors (FPIs) have remained net sellers over the past 15–18 months. In contrast, domestic institutional investors (DIIs), including mutual funds and insurance firms, have consistently supported the market.
Given the prevailing trend, domestic investor sentiment is expected to be a key driver of market direction in the near term.
Macroeconomic backdrop
The brokerage also pointed to a relatively stable macroeconomic environment as a positive backdrop for equities. Factors such as healthy GDP growth, fiscal stimulus, surplus monsoon rainfall, and rising investments under the government’s Production Linked Incentive (PLI) scheme are expected to boost domestic consumption and industrial activity.
“The macroeconomic outlook for India is positive, with growth supported by domestic drivers, structural reforms, and policy measures,” the report stated.
Bear case scenario
However, in a more conservative scenario, Kotak has outlined a bear case target of 26,208, assuming a 10% discount to the long-term average valuation (i.e., 18x FY28E EPS). This view accounts for potential headwinds such as earnings disappointments or deterioration in macroeconomic conditions.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
