Bernstein has raised its Nifty 50 target for December 2026, citing easing geopolitical tensions, moderating crude oil prices, lower bond yields and improving fund flows. However, the brokerage has retained its near-term Trading Buy rating while maintaining a Neutral outlook on Indian equities over the next 12 months.
The global brokerage firm has revised its December Nifty 50 target to 26,100 from 25,000, valuing the index at 18.5 times its FY28 estimated earnings, against 18 times earlier. It believes global easing and near-term momentum can support valuations but sees limited visibility on a sustained earnings-driven rally.
Bernstein believes the recent easing US-Iran war in the Middle East, coupled with softer crude prices, could provide further momentum to Indian equities in the near term. It said the combination of lower oil prices, supportive bond yields and improving liquidity provides sufficient reasons to remain positive on markets despite the recent rally.
The brokerage said easing geopolitical tensions could reduce India's oil import bill, narrow the current account deficit and support the rupee. Brent crude has already moderated to around $92 per barrel. While lower crude prices may have a limited direct impact on corporate earnings due to muted fuel-price pass-through, the benefits to India's external balances, currency and bond yields could be meaningful.
ALSO READ: Nifty 50 Year-End Target Maintained At 26,200: BofA; Prefers Large-Caps; Upgrades Hospitals, Telecom
Strong Q2 Earnings Offer Temporary Support
Bernstein highlighted strong corporate earnings as another near-term positive. Nifty 50 companies reported 20% earnings growth in the September quarter, while the Nifty Midcap 100 recorded 14% growth. Earnings momentum was even stronger for the Nifty Next 50.
However, the brokerage firm cautioned that the headline earnings performance may not reflect the underlying weakness in the economy. Growth has been supported by a favourable base effect, tax-cut benefits and a temporary recovery in oil marketing companies' profitability.
Weak job creation, stagnant wages, subdued consumption, weak tax collections and rising fertiliser subsidies could constrain economic growth and government spending. Bernstein also flagged the potential impact of artificial intelligence on services-sector employment.
Financials Remain Bernstein's Preferred Sector
On the investment front, Bernstein believes Financials remain the most attractive sector, given the lack of conviction in other large-cap segments. It sees limited opportunities in IT, while expensive valuations and stagnant volumes make Consumer stocks less attractive.
The brokerage also cautioned that India's expensive valuations, fiscal constraints and limited earnings upgrades could weigh on medium-term market performance. It noted that global capital allocation towards AI-related opportunities could also limit structural inflows into emerging markets such as India.
ALSO READ: MSCI November Rejig: Coforge, LIC, Adani Green Among Likely Additions; Meesho Also In Focus
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.