Nomura predicts Nifty at 29,300 by next December - But this one risk could derail rally

Nomura Predicts Nifty to Reach 29,300 by 2026, Cautions on Expensive Markets

The Nifty recently hit a fresh high, but the rally could surge higher. According to a recent report by Nomura, the benchmark Index may scale up to 29,300 by December 2026, indicating about 12% gains.

Nomura's Nifty Forecast: Key Factors to Watch

Nomura's target of 29,300 is based on a model that uses Dec-2027 forward earnings and a low-20s valuation multiple. The brokerage expects several key factors to come together to reach this level:

• Inflation Stays Low: Nomura expects inflation to remain low, providing a conducive environment for growth.
• RBI Cuts Rates: The brokerage expects the RBI to cut rates as expected, reducing borrowing costs and supporting valuations.
• Domestic Demand Remains Steady: Nomura expects domestic demand to remain steady, driving growth and supporting the market.

Nomura's On Earnings Outlook: Gains Possible but Risks Remain

Nomura expects low double-digit earnings growth in FY26, supported by a recovery in commodity-linked sectors. However, the brokerage cautions that:

• Earnings Estimates Cut: Earnings estimates for FY26–FY28 have already been cut, and could be lowered again if private investment does not improve or if global trade slows.
• Valuations Stretch: Some parts of the market have seen valuations stretch considerably due to strong domestic buying, making them vulnerable if sentiment weakens.

Nomura on India: Capex Remains the Key Missing Piece

Nomura's data shows that private capex is still the weakest part of the economic cycle, with new project announcements and manufacturing GVA lagging behind regional peers.

• Private Capex Not Following: While public capex has held up, private investment has not followed, leaving the economy vulnerable to a slowdown.
• Need for Meaningful Growth: Nomura warns that unless private capex grows meaningfully through FY26, the earnings upgrades implied in its forecast may not materialise, and the Nifty target may need to be re-evaluated.

Nomura on India: Growth Cooling, but Consumption Steady

Nomura says growth has slowed, but India still compares well with other major economies going into 2026. Private consumption makes up nearly 61% of GDP, and the brokerage expects it to remain the lynchpin of overall demand.

• Household Debt Climbs: Household debt has climbed to above 40% of GDP from under 35% before the pandemic, requiring careful monitoring.
• Rural Real Wages Positive: Rural real wages have turned positive, which should support spending outside metro areas.

Nomura on India: Domestic Flows Strong

Nomura says domestic investors continue to be the main support for the market, with household inflows accounting for about 13% of gross financial savings in FY25.

• Household Inflows: Household inflows have been a reliable base for the market, even when foreign flows stay weak.
• Foreign Investors Still Absent: Foreign investors have still not returned in a big way, with their comeback dependent on lower global volatility and reduced risk premia.

Nomura on External Risks that Can Change the Picture

Nomura has flagged several global risks that could hurt the outlook:

• Rising Global Risk Premia: A rise in global risk premia could lead to earnings cuts and put pressure on valuations.
• Renewed Tariff Cycle: A renewed tariff cycle could hurt exports and lead to earnings cuts.
• Slower Growth in the US or China: Slower growth in the US or China could lead to reduced demand for Indian exports.
• Sharp Rise in Commodity Prices: A sharp rise in commodity prices could hurt the profitability of commodity-linked sectors.
• Wider Trade Deficit: A wider trade deficit could put pressure on the rupee and lead to higher inflation.