Nifty target: Despite the Nifty 50 declining more than 9% this year, smallcase managers remain optimistic about the outlook for FY27, expecting India’s benchmark index to trade in the 28,000–30,000 range by the end of the financial year.
According to the managers, the next phase of the market rally is likely to be driven by earnings growth rather than valuation expansion, with investors expected to focus more on sustainable profitability, execution strength and balance sheet quality instead of aggressive re-rating.
Smallcase managers have projected earnings per share (EPS) estimates for the and in the range of ₹1,280– ₹1,320. Based on the expected earnings trajectory, they expect the benchmark index to trade within a valuation band of 22x–24x, reflecting confidence in India’s domestic growth momentum and corporate profitability.
smallcase, launched in 2016, provides investment products and platforms across listed stocks, ETFs and REITs. The platform said it has served over 10 million individual investors so far.
“We expect NIFTY 50 to be in the range of 28,000–30,000 in FY27, a potential upside of nearly 15%–25% from current levels, supported by continued strength in sectors such as Banking, Capital Goods, Telecom, and domestic manufacturing themes,” said Ashwini Shami, smallcase Manager, President and Chief Portfolio Manager at OmniScience Capital.
The managers noted that while markets witnessed significant volatility during FY26 due to geopolitical tensions, foreign institutional investor outflows, elevated and valuation concerns, strong domestic fundamentals helped prevent a deeper correction.
Where should you invest?
Smallcase managers continue to remain constructive on sectors linked to India’s domestic capex and manufacturing story.
According to the report, remained relatively resilient during the year, while broader markets witnessed sharp divergence, making stock selection increasingly important for investors. The managers also said FY26 rewarded companies with strong earnings visibility, pricing power and healthy balance sheets rather than broad-based market growth.
According to Sneha Jain, smallcase Manager and Founder at Green Portfolio, sectors such as capital goods, industrials, defence and BFSI continue to offer strong earnings visibility and policy support.
“Defensive segments such as and select FMCG are expected to provide portfolio stability amid market volatility, while IT Services may offer gradual recovery opportunities as global demand conditions improve,” Jain said.
Jain also noted that implementation of key free trade agreements (FTAs) with regions including the European Union, the United States and the United Kingdom could significantly reshape export competitiveness and sector profitability going forward.
At the same time, market participants continue to remain optimistic on opportunities emerging in the broader market space.
“One theme which is clearly coming out of the discussion is small & midcaps,” said Ambareesh Baliga, smallcase Manager and market analyst, while emphasising that the segment is likely to outperform large-caps in the foreseeable future because of valuation-performance mismatches.
Crude oil, inflation and valuations remain key risks
While managers remain bullish on the long-term India story, they also warned that the ongoing West Asia conflict could place pressure on India’s macroeconomic indicators during FY27.
According to the report, rising crude oil prices may increase India’s oil import bill from around $123 billion in FY26 to nearly $132 billion in FY27. This could potentially widen India’s current account deficit to nearly 1% of GDP compared with 0.7–0.8% in FY26.
The managers also cautioned that a sustained rise in could fuel inflationary pressures. According to the report, every 10% increase in crude oil prices could potentially raise WPI inflation by 80–100 basis points and CPI inflation by 40–60 basis points, thereby impacting economic growth.
On valuations, the managers noted that certain pockets of the market are currently trading at historically elevated levels.
According to the report, the metals and mining space appears fully valued and vulnerable to correction, while financials and FMCG offer relatively better risk-reward opportunities. Private banks, NBFCs and insurance companies are trading near cyclical valuation lows, whereas FMCG valuations have moderated closer to historical trough levels.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.