As the Budget 2026-27 nears, attention is likely to turn towards structural economic reforms, with fewer opportunities for significant tax breaks following last year’s tax slab adjustments and GST rate reductions. The Indian stock markets have stabilized after recent fluctuations, influenced by global geopolitical uncertainties and trade-related risks with the US. Despite this, domestic economic indicators and fundamental metrics remain robust, buoyed by favorable policy measures, as per PL Capital’s ‘India Strategy Report.’
Nifty, the key index, has retraced most of its recent gains and remains relatively stable. The evolving global geopolitical landscape and trade dynamics are introducing higher business uncertainties globally. Moreover, India’s ongoing trade disputes with the US are impacting market sentiments. Nevertheless, the report highlights that domestic demand outlook and macroeconomic indicators continue to exhibit strength in the third quarter and beyond, driven by factors like interest rate cuts, GST reforms, tax reductions, and low inflation, which have bolstered consumer confidence and spending.
Anticipating a sustained economic momentum, Amnish Aggarwal, Co-Head Institutional Equities at PL Capital, emphasized the positive effects of recent tailwinds such as tax cuts, repo rate reductions, favorable monsoons, low inflation, and GST adjustments carrying forward into the next year. Despite short-term caution, the Nifty’s earnings per share (EPS) are forecasted to grow at a 14.8 percent compound annual growth rate (CAGR) between FY26–28. The brokerage values Nifty slightly below its historical average price-to-earnings ratio, setting a 12-month target at 28,814, a slight decrease from the previous 29,094.
While maintaining a near-term cautious stance, the brokerage projects that large-cap stocks will continue to outperform, having delivered returns of 16–17 percent over the past year. It anticipates sectors focused on domestic markets like banks, NBFCs, automobiles, essential goods, jewelry, defense, durable goods, and metals to excel in the short to medium term. The report notes a gradual rise in demand for consumer staples post inventory adjustments, with rural consumption outpacing urban demand. Urban sentiment has also improved steadily, hinting at potential growth in the upcoming months.
