New Delhi: A “Goldilocks” year is in store for India in 2026 with double digit nominal growth falling rates, stable currency, and easing global risks combine to create a fertile backdrop for equities, led by metals, BFSI, capital goods, and defence, a report said on Saturday.
The report from HDFC Securities said that 2026 looks forecasted Nifty earnings growth of about 16 per cent for FY27, set a 2026 return expectation of around 11 per cent and put a year end Nifty target at 28,720.
RBI–government reflation push through rate cuts, CRR reduction, and liquidity infusion supports domestic demand in 2026.
Global trade uncertainty is expected to ease, with tariff reversals and an anticipated India–US trade deal in early 2026, it said.
The report highlighted corrected valuations and historically low foreign portfolio investor positioning as creating scope for upside, including short covering, while retail participation driven by record SIP flows and demat account additions remains a structural support.
Capital rotated toward North Asia in 2025, while India saw persistent FII outflows due to valuation concerns—creating a potential reversal opportunity in 2026. AI continues to remain a dominant structural theme, driving capex, productivity gains, and global investment flows.
Metal sector has the strongest structural tailwinds with infrastructure push, capacity additions, and global commodity upcycle to drive gains.
Capital goods stocks could benefit from a strong public capex cycle, while earnings visibility remains healthy though valuations warrant caution, it said.
It also noted an AI led recovery in IT in H2 2026 and a gradual consumption recovery with premiumisation supporting margins.
The report warned of key risks including disappointment relative to elevated expectations from AI could trigger volatility, though the investment cycle remains long-term positive.
Further high global debt levels raise the risk of credit events as well as wider spreads, while a heavy IPO pipeline of over Rs 2.5 lakh crore could drain secondary market liquidity, the report said.
(IANS)
