Foreign brokerages remain cautious on the road ahead for the Indian equity markets.
Though analysts at Nomura have revised their March 2026 Nifty target to 26,140 levels from the earlier 24,970, but the upside from the current levels is a modest 6 per cent.
BofA Securities, on the other hand, has not made any change to its year-end Nifty target.
The Nifty, Nomura said, is currently trading at 20.5x one-year forward earnings, which is near the high-end of its trading range over the past three years.
“However, the favorable spread between earnings yield and bond yield at -1.4 per cent – which is at the high end of the range that prevailed over the past four years – is comforting. Based on 21x price to earnings (P/E) on FY27F earnings, we arrive at our March 2026 Nifty target of 26,140,” wrote Saion Mukherjee, managing director and head of equity research for India at Nomura in a recent coauthored note with Amlan Jyoti Das.
Those at BofA Securities, too, remain cautious on the markets in the near term led by weakening global macro.
The ongoing monetary stimulus, BofA said, would help India revive its gross domestic product (GDP) / capex / consumption growth, but see a shallow revival, and hence remain conservative on GDP growth at 6.3 per cent versus Reserve Bank of India (RBI) projection of 6.5 per cent in fiscal 2025-26 (FY26).
“Given the recent rally, we see no upside to our Nifty year-end target of 25,000.
"Near-term, incrementally, we see seven emerging risks that make us cautious on Nifty / large-caps, and we continue to stay bearish on the broader markets,” wrote Amish Shah, India equity strategist at BofA Securities in a recent coauthored note.
The markets, BofA Securities said, are now fully pricing in an imminent India-US trade deal, leading to India being a key beneficiary of shifting global supply chains.
However, any potential global slowdown amidst ongoing trade war is not priced in yet.
Flows to the equity markets - both domestic and foreign, too, remain at risk, BofA said. While DII flows could remain volatile in the months ahead and may even moderate.
Domestic inflows, data suggests, peaked at $8.6 billion in October 2024 and have seen moderation since then to $6.1 billion in April 2025.
“May flows stand at $3.5 billion versus $13.5 billion outflows for January - March 2025.
"However, with recent market rally, relative return potential for Nifty has become unattractive for FIIs versus US treasuries (4.3 per cent) and equity risk premium.
Thus, we see risk to FII flows going forward,” Shah wrote.
Sector focus
As a strategy, Nomura prefers domestic-focused sectors to exporters given the global uncertainties, and prefer consumption to investment themes.
The investment cycle, Nomura said, is likely to be delayed because of global uncertainties.
Supply-chain relocation themes such as autos, pharmaceuticals/chemicals and electronic segments are their preferred sectors.
Financials, consumer staples, autos, discretionary, oil and gas, power, telecom, internet, real estate and select domestic healthcare plays are some of their other top bets.
“Within industrials, we are constructive on companies that are play on investment in the power sector.
"We are cautious on export sectors and capex themes.
"These include IT services, industrials, cement, and metals.
"On pharma, ensuing US tariffs present a near-term headwind, but we expect the impact to be passed on and hence a correction may be a buying opportunity,” Mukherjee wrote.
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