BofA Securities expect Nifty to offer 11.4% upside in CY26

Nifty 50 Expected to Reach 29,000 by 2026 with 11.4% Upside

Bank of America Securities has released a report indicating that the Indian equity benchmark Nifty 50 is expected to reach 29,000 by 2026 with an 11.4% upside.

Upside and Downside Risks

• Upside Risks: Potential reforms, likely FII outflows' reversal, and events calendar, which could lead to a sharp correction for SMID caps on the downside.
• Downside Risks: Further rupee depreciation, crude price spike, delay in US-India trade deal, and correction for the US markets.
• Upsides: Potential RBI/FED rate cuts, fewer large state elections, conclusion of pay commission hike report, and FII outflows reversal.

Market Analysis

According to the report, an analysis of over the past two decades suggests that Nifty sustains higher valuations only during periods of strong earnings growth/ upgrades, which is unlikely next year.

Valuations and Earnings Growth

• Nifty deserves to trade at valuations slightly above its long-term averages at 19.6x.
• Nifty could sustain its current +1SD (standard deviation) valuations led by likely continuation of robust domestic flows.

Growth Estimates

Growth in FY27 could expand led by pick-up in loan growth for financials, discretionary spends aided by GST cuts, telecom tariff hikes, stronger non-ferrous metals, and very low base for IT & staples.

Liquidity and FII Outflows

• Liquidity in the market likely to improve as FII outflows from secondary markets moderate and liquidity from strong DII flows continues.
• Primary activity to remain strong in CY26.

Further, the report expects flows of $46 billion (+52% higher) to secondary markets in CY26, which will help sustain valuations at +1SD.