Corporate Earnings To Face More Headwinds, Hiccups Likely In Near-Term Economic Growth, Nomura Says
Nomura set a December 2025 target for Nifty at 23,784, implying about a 4% upside from the previous close.
Headwinds for corporate earnings might rise, limiting earnings growth in the near term and potentially hindering economic growth, according to Nomura Research.
The brokerage has modest expectations for the domestic stock market this year, with returns anywhere between negative 5% to positive 12% for the benchmark Nifty 50.
Nomura expects a cyclical recovery in economic growth from the lows of the second quarter, driven by a pick-up in government expenditure growth and a more accommodative central bank policy.
However, the brokerage said there are headwinds for the corporate earnings-to-GDP ratio to improve in the near term. This could limit the earnings growth outperformance-to-economic growth in the near term.
A potential dip in the net investment-to-GDP ratio, a rise in household savings, government’s commitment to fiscal consolidation and decline in the dividend-to-GDP ratio are the headwinds for corporate earnings, according to Nomura.
The research firm lowered the Nifty 50 consensus earnings estimates for December 2026 by 3.5%. "We think an additional low- to mid-single-digit percentage earnings cut remains a possibility," Nomura stated.
The benchmark NSE Nifty 50 and the BSE Sensex have fallen 13.3% and 11.7%, respectively, from the previous peak, triggering the worst fall since 2020. The fall is primarily due to market fatigue after the strong run, when expectations were set high, Nomura said.
The price to earnings for Nifty 50 have moved lower to 19 times one-year-forward earnings from the September 2024 peak of 21.3 times. Nomura set a December 2025 target for Nifty at 23,784, implying a nearly 4% upside from the previous close.
Nomura recommends being highly selective and avoiding richly valued stocks. It is overweight on financials, consumer staples, oil and gas, telecom, power, pharma, internet, and real estate. The brokerage is underweight on consumer discretionary, autos, capital goods, cement, hospitals, and metals.
