Equity markets are likely to remain range-bound in the near term even as the medium-term earnings outlook for the stays constructive, according to a recent India Strategy Report by PL Capital. The brokerage has revised its 12-month Nifty target to 28,814 from 29,094 earlier, citing global uncertainties and execution-related challenges, while maintaining confidence in India’s structural growth story.
PL Capital noted that the Nifty has given up most of its recent gains and has largely traded flat amid rising geopolitical risks and persistent tariff-related uncertainties with the US. These external headwinds, combined with heightened global business uncertainty, have weighed on market momentum. As a result, the brokerage expects investors to remain cautious in the near term, with large-cap stocks continuing to outperform.
Despite the muted near-term outlook, PL Capital highlighted that domestic macro fundamentals remain resilient. According to the report, improving consumer sentiment is being supported by multiple policy tailwinds, including cumulative repo rate cuts of 125 basis points, income tax reductions, rate rationalisation, low inflation levels and normal monsoons. These factors are expected to sustain economic momentum into the next financial year.
PL Capital has marginally revised its Nifty earnings estimates, cutting FY26 and FY27 projections while slightly raising FY28 estimates. Even so, the brokerage expects Nifty earnings per share to grow at a compound annual growth rate (CAGR) of 14.8 per cent over FY26–28. Valuing the index at a 3 per cent discount to its 15-year average price-to-earnings multiple, PL Capital arrived at a 12-month target of 28,814.
Sectoral view
On sectoral positioning, PL Capital said domestically oriented sectors are likely to outperform over the near to medium term. It sees banks, NBFCs, automobiles, select consumer staples, jewellery, defence, durables and as key beneficiaries of improving demand conditions. The report pointed out that rural demand remains steady and is growing faster than urban demand, while urban sentiment has shown gradual improvement in recent months.
Looking ahead to the Union Budget for FY27, PL Capital expects the government to continue focusing on infrastructure spending and structural reforms rather than announcing major tax-related measures. With significant income tax and GST changes already undertaken last year, the brokerage believes there is limited room for big-bang announcements. It also cautioned that fiscal deficit management could remain challenging due to softer tax collections, although higher dividends and controlled revenue expenditure may help contain slippage.
Overall, while near-term volatility is likely to persist, PL Capital remains constructive on the Nifty’s medium-term prospects, driven by a supportive policy environment, improving demand indicators and a steady earnings growth trajectory.
Amnish Aggarwal, Co-Head Institutional Equities, PL Capital, said, “As the 2027 budget approaches, the focus is likely to shift towards structural economic reforms, with limited room for major tax concessions following last year’s significant increase in tax slabs and GST rate cuts.”