CLSA Picks Eternal, ICICI Bank, SBI, Infosys, NTPC As It Projects 16% Upside For India By 2026 End

CLSA projected a 16% upside potential for Indian equities as multiple factors come together to form a base-case profitability for 2026.

The brokerage prefers Bajaj Auto Ltd., DLF Ltd., Eternal Ltd., ICICI Bank Ltd., Infosys Ltd., ITC Ltd., Oil and Natural Gas Ltd., NTPC Ltd., State Bank of India, Tech Mahindra Ltd., Tata Motors Ltd., and UltraTech Cement Ltd.

The Indian markets have gone through a 14-month adjustment process as market participants factored in lower GDP expectations, witnessed correction in higher earning-per-share estimates, and currency weakening. Now a base for profitability is forming with a tolerance for foreign divestment, transitioning from a peak in equity supply, CLSA said.

However, according to the brokerage, India is becoming more appealing among foreign investors because of the refuge from artificial-intelligence sentiment rather than for its own merit. CLSA has a lower exposure to Indian equities as of now compared to the beginning of the year, but their regression model suggests 16% upside potential by December 2026.

The consensus estimate for real-GDP growth has come down to 6% compared to 7–8% earlier. Pro-growth reforms are now challenging as the Prime Minister Narendra Modi lost the capital post in the political dynamics in 2024 election. This affects the EPS directly as India has closest association among economic output and earning generation compared to other emerging markets, according to CLSA.

One positive is that the rate of EPS revision has turned positive with the market lagging turnaround so far, the brokerage said.

Indian markets' relative value creation has fallen to 220 basis points from 680 bps in April 2024 alongside underperformance of the markets. However, its relative high profitability will stabilise through 2027, helping to underpin Indian equities. Foreign institutional investors may start to re-accumulate Indian equities from here on.

Supplies of equities have peaked in 2025 with the pace of initial public offers and secondary offers hit record levels. The drain on liquidity will reduce, according to CLSA.

India's relative price-to-earning ratio has improved selectively. The forward PE is at a lower premium to emerging markets and the price-to-book ratio is cheaper than Taiwan, CLSA said.