- Nifty 50 may reach 26,000-26,500 in 4-5 months if global conditions improve
- US bond yields at 5.35% are high and a reversal could boost equity markets
- A weaker US dollar near 95 could increase emerging market investment appeal
The Nifty 50 could scale fresh record highs of 26,000-26,500 over the next four to five months, claims Gaurav Bhandari, CEO of Monarch Networth Capital (MNCL).
His bullish outlook rests on a potential reversal in global macroeconomic conditions, including easing US bond yields, a weakening dollar and renewed foreign capital flows into emerging markets.
Bhandari believes these factors could trigger a shift in global liquidity towards riskier assets, potentially benefiting Indian equities. A combination of foreign institutional investor (FII) short covering and sustained domestic inflows could further strengthen the market recovery and support a valuation re-rating.
However, the projected Nifty 50 target remains contingent on these global triggers materialising and investor sentiment improving.
Nifty 50 Target: Why MNCL CEO Sees The Index At 26,500
Bhandari's central argument is that elevated US bond yields and a strong dollar may be approaching a turning point. If yields decline and the dollar weakens, global investors could find emerging markets more attractive, potentially directing fresh capital towards Indian equities.
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According to Bhandari, three developments could drive the next leg of the market rally:
- Falling US bond yields: Lower yields could ease financial conditions and encourage investors to move towards riskier assets.
- A weaker US dollar: Dollar depreciation could improve the relative appeal of emerging-market equities and encourage global portfolio reallocation.
- Renewed foreign investor inflows: A shift in global sentiment could trigger FII short covering, adding to buying support from domestic investors.
If these factors align, Bhandari believes the Nifty 50 could reach 26,000-26,500 within the next four to five months.
US Bond Yields at Elevated Levels: Why a Reversal Matters
Bhandari has highlighted the sharp rise in US Treasury yields as a key risk to the global economy and a potential catalyst for a change in market direction.
According to the figures cited by MNCL, the US 10-year Treasury yield has climbed to 5.35%, its highest level in 24 years, after rising 110 basis points in calendar year 2026. The firm argues that persistently high borrowing costs are adding to pressure on government finances, housing demand and broader economic activity.
The US government's interest burden has also become a major concern, with annual interest costs estimated at nearly $1.8 trillion against outstanding debt exceeding $35 trillion. Meanwhile, the 30-year mortgage rate at 7.03% has weighed on housing affordability.
Bhandari believes the current level of bond yields is unsustainable and expects a reversal to eventually redirect liquidity towards equities.
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“The yield at 5.35% is not a new normal; it is the peak of an extreme that is already breaking the US economy from the inside,” he said.
For Indian markets, the key implication is that a sustained decline in US Treasury yields could improve global risk appetite and make emerging-market assets more attractive. However, the timing and magnitude of any such reversal remain uncertain.
Dollar Index at 95? MNCL CEO Points to US Fiscal and Trade Deficits
A second pillar of Bhandari's bullish outlook is the potential weakening of the US dollar.
The US continues to run a substantial fiscal deficit alongside a persistent trade deficit. Bhandari believes this combination could increase pressure on the dollar, particularly if global investors begin reassessing their exposure to US assets.
The Dollar Index has already fallen below 100 at least once in 2026, according to the assessment cited by MNCL. Bhandari expects further weakness, potentially towards 95.
A softer dollar could benefit emerging markets by improving their relative attractiveness to international investors. Indian equities, in particular, could see renewed interest if global portfolio allocations shift away from dollar-denominated assets.
For the Nifty 50, the key question is whether dollar weakness translates into sustained FII buying rather than a temporary improvement in sentiment.
$6.3 Trillion in US Money Market Funds: A Potential Liquidity Trigger
Bhandari has also pointed to the $6.3 trillion parked in US money market funds as a potential source of liquidity for global financial markets.
If US yields decline, returns on cash-like instruments could become less attractive, potentially encouraging investors to seek higher returns in equities and other risk assets. Such a shift could support global stock markets, including India.
Bhandari also expects changes in global carry trades to influence capital flows. If investors unwind positions built around interest-rate differentials, the resulting currency and asset reallocations could amplify market movements.
However, money market assets would not automatically flow into Indian equities. The extent of any rotation would depend on interest-rate expectations, currency movements, risk appetite and competing investment opportunities.
FII Short Covering, Rs 31,000 Crore Domestic Inflows: Can Nifty Re-Rating Follow?
Another potential catalyst is the positioning of foreign investors in Indian equity derivatives.
Bhandari believes substantial FII short positions in equity futures could create the conditions for short covering if global sentiment improves. When investors close bearish positions, they may need to buy back futures contracts, adding to upward market pressure.
At the same time, domestic investment flows could provide a source of support. Bhandari's assessment points to domestic inflows of around Rs 31,000 crore per month as an additional factor that could help absorb selling pressure and sustain demand for Indian equities.
The combination of improving global liquidity, FII short covering and domestic buying could, in his view, support a valuation re-rating.
MNCL's assessment suggests that valuations could expand from around 18 times to 22-24 times, potentially providing another leg of support for the market if earnings expectations and investor sentiment remain favourable.
Such a re-rating, however, is not guaranteed. It would depend on the sustainability of earnings growth, the direction of interest rates and the extent to which foreign capital returns to Indian equities.
Nifty 50 Outlook: What Should Investors Watch?
Bhandari's Nifty 50 target of 26,000-26,500 over the next four to five months is based on a potentially favourable combination of global and domestic factors. The forecast assumes that elevated US bond yields ease, the dollar weakens and global investors increase their exposure to risk assets.
Investors should monitor the following indicators to assess whether the bullish scenario is gaining traction:
- US 10-year Treasury yield: A sustained decline could signal easing pressure on global financial conditions.
- Dollar Index: Further weakness towards 95 could improve the relative appeal of emerging markets.
- FII activity: A reduction in bearish derivatives positions, followed by sustained cash-market buying, could strengthen the recovery.
- Domestic flows: Continued domestic investment could provide support during periods of foreign investor volatility.
- Corporate earnings and valuations: A sustained market re-rating would need to be supported by earnings prospects and investor confidence.
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