Kotak sees Nifty 50 rising 24% to 32k by December 2026 in bull case; check key reasons

Kotak sees Nifty 50 hitting 32,032 in December 2026 in bull case; check key reasons

After remaining range-bound in 2025, Kotak Securities sees markets rising in 2026 as the earnings outlook has strengthened amid resolute government action. The domestic brokerage said that it expects Nifty 50 to jump up to 24 percent to hit 32,032 by the end of the next year in its bull case.

In its base case, Kotak sees Nifty 50 rising 13 percent from the previous closing level of 25,758 to hit 29,120 in December 2026. The brokerage has listed out reasons why it held a favorable view of the Indian markets.

Indian markets delivered 'quite mediocre' returns in 2025

Kotak, in its latest report titled 'Market Outlook 2026', said that its earlier concerns regarding high valuations and the risk of earnings downgrades have already played out meaningfully over the last 12-15 months, reducing downside risks and improving the overall market setup.

It noted that the Indian markets have largely remained flat over the past 12-15 months and have underperformed most developed and emerging markets over the last year. It said that one-year return of the Indian market has been "quite mediocre", though the three-year performance remains very strong.

Indian equity benchmarks broke their previous record highs in November after 14 months.

"Primary market activity continues to attract robust interest from both institutional and retail investors, reflected in the large number of new listings on the main exchanges. In the secondary market, domestic investors have maintained a positive stance, while FPIs have been cautious for several months. Retail investors, channeled through DIIs such as mutual funds and insurance companies, have consistently been net buyers over the past few years, whereas FPIs, private equity investors, and promoters have largely been net sellers over the past 15–18 months," Kotak Securities said.

As FPI outflows persist, domestic investor sentiment is likely to play a crucial role in determining the market's direction going forward, the brokerage said. It added that tariff jitters and geopolitical tensions will likely keep impacting global GDP growth in 2026. Its estimate for FY26E real GDP growth stood at 7.8 percent.

Government's measures to increase disposable incomes, reduce tax burdens, and support job creation will serve as direct stimulus to domestic demand at a time when global trade conditions are weak, helping strengthen India's economic momentum, it said.

While Kotak expects only a moderate pickup in earnings in FY26E, it anticipates a strong recovery in the net profits of the Nifty 50 index constituents in FY27E, supported by improving fundamentals and a relatively improving macro backdrop, it said.

"More important, we expect the growth in net profits in FY27E to be broad-based across sectors. Nifty-50 Index net profits grew by 6.6% in FY25, and the growth is expected to be at 8.2% in FY26E and accelerate to 17.6% in FY27E,” it added. “Overall, the macroeconomic outlook for India is positive, with growth supported by domestic drivers, structural reforms, and policy measures," it further said.

Kotak's preferred sectors include BFSI, information technology, healthcare and hospitality.

Nifty 50 target:

Base case: As part of its base case, Kotak sees Nifty 50 hitting 29,120 by the end of the calendar year 2026. As part of this scenario, the brokerage expects profits of Nifty 50 index constituents to grow by 8.2 percent in FY26E, by 17.6 percent in FY27E and by 14.8 percent in FY28E.

"We value Nifty at par (at 20.0x) to last 10-year average PE of 20.0x on FY28E EPS of Rs 1,456 and arrive at December 2026 Nifty target of 29,120," it said.

Bull case: As part of its bull case, Kotak values Nifty 50 at 10 percent premium to 10-year average PE of 20x on FY28E EPS. Its Nifty 50 target under this scenario stands at 32,032 by the end of 2026.

Bear case: As part of its bear case, Kotak values Nifty at 10 percent discount. Its target for the benchmark index stands at 26,208.

What should investors do?

Domestic fundamentals remain strong, Kotak said, adding that it is optimistic about the next wave of growth. "Long-term investors should focus on quality stocks and add on dips. Risks include geopolitical tensions, trade protectionism and currency fluctuations,” it concluded.

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