Nifty 50 target: Analysts see 11% gains for the index in FY26 amid hopes of improved economic conditions, FII flows | Stock Market News

Nifty 50 target: The financial year 2025 (FY25) turned out to be a year of two halves as the Indian stock market witnessed a strong bull run till September, followed by a period of massive selling.

The Nifty 50 index galloped to a record high of 26,277 in September 2024. But from thereon it was a downhill ride for five straight months – the longest such streak for the index since its inception in 1996 – as slowdown in India Inc earnings, fears of the impact of Donald Trump’s tariffs and expensive valuations marred the prospects for the Indian stock market. In March, the stock market, however, rebounded significantly, taking the financial year gains to 5.34%.

This rally was driven by value buying as several beaten-down stocks turned attractive, the return of foreign portfolio investors (FPIs) after a prolonged selling streak, improved economic conditions and hopes of a turnaround in India Inc earnings.

While foreign investors poured $2.65 billion into Indian stocks in the last five sessions, it wasn’t enough to offset foreign outflows of $15.57 billion for the fiscal year, the second-highest ever, according to Reuters data. The FPI flows shifted from India to China amid stimulus measures and AI-related developments.

Nifty 50 at 26,500 by FY26?

Although, Nifty still trades 10.5% below its record highs in late September, market participants believe the worst is behind for Indian equities. Chokkalingam G, Founder, Equinomics Research, said the worst is over and the first quarter of FY26 will be very robust. This trend, Chokkalingam believes, will be driven by valuations becoming appealing, especially in the small-cap and mid-cap segments. The 30-40% crash in some stocks has eased valuation concerns, sparking bottom fishing by investors.

Against this backdrop, analysts expect the Nifty 50 index to hit the 26,000-26,500 mark by the end of the next financial year, depicting an over 11% rise in the index from current levels.

Shrikant Chouhan, Head Equity Research, Kotak Securities, pegged the FY26 Nifty base case target at 26,000, which is 19.50x FY27EE. “We expect profits of the Nifty 50 index to grow by 4.6% (EPS of ₹1031) in FY25, by 13.2% (EPS of ₹1167) in FY26E and by 14.4% in FY27E (EPS of ₹1335),” said Chouhan. Along with earnings, Chouhan is hopeful that strong Indian economic conditions and favourable demographics would drive the stock market higher in the next financial year, set to begin tomorrow (April 1).

Chouhan opined that government and private capex are expected to revive around average levels, while above-average reservoir levels can boost the Rabi Crop and control inflation. He believes inflation will be well anchored by the Reserve Bank of India (RBI) in FY25 and FY26.

India’s retail inflation eased to a seven-month low of 3.61% in February, down from 4.31% in January. For FY26, inflation is forecasted at 4.2%, which is closer to the RBI’s lower band of 4%.

Additionally, Chouhan believes that India has High Return (ROE) and Low Risk (Beta) given its favorable demographic with a large young population. On the economic front, he expects India’s GDP to accelerate to 6.50%.

Chandan Taparia, Head of Derivatives and Technicals, Wealth Management at Motilal Oswal Financial Services, said he expects the Nifty 50 to head towards the 26,000-26,500 zone while commenting on the Nifty target for FY26. Better corporate earnings, return of FII flows, and interest rate cut by the RBI are behind Taparia’s bullish view.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.