Nomura has revised its March 2026 forecast for the Nifty to 24,970, based on 19.5x FY27e Nifty EPS of Rs 1,280, and after factoring in a 5% cut to current consensus estimates.
The valuation multiple has been raised from 18.5x to reflect the drop in bond yields, assuming there is no material increase in the equity risk premium. The brokerage expects the Nifty to trade in a range of 17–20x one-year forward earnings, implying a potential market return of (-)9 percent to 7 percent over the next one year, depending on how valuations pan out.
Consensus earnings estimates have already seen downward revisions since November 2024, but Nomura still fears further downside risk, particularly with the economic growth continuing to moderate. Nomura’s economics team expects real GDP growth of 5.8% for FY26, below the street estimate of around 6.5%.
Impact of Tariff War
Nomura said that Indian equity markets have shown resilience in the face of recent global disruptions, including tariff-related concerns. The market is now anticipating the possibility of trade agreements between the US and several countries in the near future, including India and Vietnam, the note added. “While a comprehensive agreement may take time, interim trade deals with some of these countries could emerge during the 90-day moratorium on reciprocal tariffs. However, this outlook is not without challenges,” the report said.
Going ahead, announcements of even partial deals could offer a lift to market sentiment, though the broader uncertainty arising from the ongoing US-China trade conflict could linger on in the shorter term.
After the aggressive selling by the FIIs over the last few months, the brokerage suggests that foreign investors may be encouraged to deploy capital to India owing to some moderation of valuation multiples from the highs. “Unless unprecedented risks emerge, FIIs flows can be supportive in the future,” the report said.
Portfolio Preferences
The brokerage has maintained a more bottom-up approach to stock picking, and suggested to avoid stocks with high valuation multiples, as they fear risk premium may ‘flare up’.
Nomura has a more positive stance when it comes to domestic sectors, particularly consumption, and potential beneficiaries of supply-chain relocation. “We are incrementally more positive on discretionary and autos, where there has been a significant reset of expectations and valuation correction,” the report said.
Nomura is also positive on financials, consumer staples, discretionary, oil and gas, telecom, power, internet, real estate and select domestic healthcare plays. On the other hand, they remain cautious on ‘export focussed sectors and capex themes’ such as IT services, industrials, cement, and metals. When it comes to pharma, the US tariff regime is a near-term headwind, but the impact may be passed on, said Nomura, and hence a correction should be an opportunity on buy.
Among its top large-cap stock picks, Nomura lists Axis Bank, ICICI Bank, SBI, Bajaj Finance, Godrej Consumer, Mahindra & Mahindra, Larsen & Toubro, CG Power, Reliance Industries, Tata Power, and Macrotech Developers (Lodha). In the small and midcap segment, preferred names include Federal Bank, Marico, Dixon Technologies, Uno Minda, Godavari Power, Lupin, MedPlus, and Dr. Lal PathLabs
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