Global brokerage BofA Securities has maintained its bullish outlook on Indian stock market, expecting the Nifty 50 to deliver another 4.7% upside from current levels. The brokerage has maintained its year-end Nifty 50 target at 26,200, as it believes that most of the key risks weighing on the market are now understood and largely factored into valuations, while an improving corporate earnings trajectory could support further gains.
However, BofA expects volatility to persist amid geopolitical developments, US Federal Reserve interest rate decisions and emerging concerns around El Niño and the Eighth Pay Commission.
The brokerage turned constructive on Indian equities in September 2026 after remaining bearish on the Nifty since August 2024. It had argued that several uncertainties, including elevated crude oil and commodity prices, weaker monsoon prospects, rupee depreciation, potential interest rate hikes by the Fed and RBI, and large fundraisings, were largely reflected in market valuations.
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BofA believes the Nifty's recent outperformance against small and midcap stocks and large emerging markets could continue. It also sees room for valuation expansion, with the benchmark currently trading at around 18.3 times earnings, close to its long-term average.
The brokerage highlighted an improvement in corporate earnings growth, which accelerated to 13% in the first quarter of FY27 and is estimated at 18% in the second quarter, compared with just 5% in the fourth quarter of FY26. It believes the bulk of consensus earnings downgrades are now behind the market.
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Prefer Large Caps Over Mid And Small Caps
BofA remains cautious on small and midcap stocks, despite their recent correction and underperformance against the Nifty. It expects the trend to continue due to weaker earnings revisions, limited deleveraging in margin trading funding (MTF) and potential pressure on rural and capital expenditure-linked businesses.
The brokerage pointed out that MTF-led deleveraging has remained limited at 4.8%, compared with 10-20% during previous market correction episodes. Smallcap stocks account for nearly 45% of MTF exposure.
BofA also flagged El Niño and the Eighth Pay Commission as potential risks for FY28 growth and fiscal finances. Historically, El Niño years have been associated with weaker rainfall and agricultural growth. Meanwhile, higher Pay Commission payouts could add around 60 basis points to FY28 government expenditure.
Sectoral Strategy: Hospitals And Telecom Upgraded
In its latest sectoral strategy, BofA has turned cautious on two-wheeler stocks while upgrading hospitals and telecom sectors. The upgrades reflect relatively defensive earnings prospects and improved valuations in these sectors.
The brokerage, however, believes that clarity on El Niño and Pay Commission-related developments will emerge only after May 2027 and is unlikely to derail the Nifty's near-term upside.
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