Macquarie Capital's 2026 market outlook: Nifty heading for 30,000 on earnings recovery

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At previous close, the Sensex was down -436.41 points (-0.51 percent) at 84,666.28, and the Nifty was down -120.90 points (-0.47 percent) at 25,839.65

India's equity markets are poised for a significant rebound in 2026, with the Nifty potentially heading towards the 30,000 mark, driven by a strong earnings recovery, according to Aditya Suresh, Managing Director and Head of India Research at Macquarie Capital. Speaking with CNBC TV18, Suresh outlined a shift in the firm's outlook from cautious to optimistic, predicated on the belief that the phase of earnings downgrades is largely complete.

Suresh explained that Macquarie's cautious stance at the beginning of the year was based on anticipated earnings cuts, which have since materialised. Fiscal year 2026 has been a period of anemic growth, with revenue expansion tracking below nominal GDP and earnings per share (EPS) growth at a mere 2-3%. "You're trading at a high valuation and no growth," he noted, describing the problematic dynamic the market has worked through. However, the outlook for fiscal years 2027 and 2028 is considerably brighter, with the firm's bottom-up analysis pointing towards a return to mid-teens EPS growth.

This projected recovery is underpinned by robust expectations across key sectors. In financials, which constitute about 30% of the MSCI India index, the firm anticipates high-teens credit growth and potential margin expansion. Similarly, their analysts are more optimistic than the broader market on both revenue and margins for the IT sector. This earnings comeback is expected to be a crucial catalyst for attracting foreign institutional investors (FIIs) back into the Indian market.

When asked about a potential Nifty target, Suresh confirmed the firm's bullish tilt. When asked if by 2026, the outlook is leaning more towards 30,000 on Nifty rather than 20,000, he replied: "Well, that was the one-line kind of catch-all kind of comment. But that wasn't our mindset 12 months back." He acknowledged that Indian valuations remain expensive in absolute and relative terms. However, he argued that a combination of returning foreign capital and resilient domestic liquidity could lead to further multiple expansion despite the high starting point.

Regarding the active initial public offering (IPO) market, Suresh commented that while the market's liquidity can support the current pace of around $20 billion in annual paper supply, there is a "red herring" to consider. A significant portion of this supply comes from promoters and private equity/venture capital (PEVC) investors cashing out at rich valuations, rather than capital being raised for growth and capex.

On sector-specific views, Macquarie remains optimistic on select names in the electronics manufacturing services (EMS) space, such as Dixon and Avalon Technologies, citing a favourable combination of growth, returns, and free cash flow generation. Within the vast financials universe, the approach is highly selective. The firm's preference is for large private banks like HDFC Bank and ICICI Bank, followed by specific non-banking financial companies (NBFCs) and insurance companies. Public sector undertaking (PSU) banks rank lowest in their order of preference.