- BofA projects Nifty downside of 8% and upside of 9% by December 2026
- Bear case risks include high crude prices, weak monsoons, and rate hikes
- Base case values Nifty at 26,200 driven purely by earnings growth
Global brokerage BofA Securities has laid out a two-sided view on Nifty, projecting an 8% potential downside in a bear case scenario alongside a 9% upside in its base case for the year ending December 2026.
In a bear case where risks such as elevated crude prices, weak monsoons, Fed and RBI rate hikes, and INR depreciation all materialise, BofA sees Nifty falling to 22,000. Its base case, however, pegs Nifty's fair value at 26,200 by December 2026, a target the brokerage said requires no valuation expansion and would be driven purely by earnings growth.
BofA has raised its Nifty FY27 EPS growth estimate to 10%, up from 8.5% earlier, citing resilient high-frequency indicators including GST collections, credit growth and government capex. The brokerage said India's growth "has been resilient" despite multiple macro headwinds, pointing to strength in ongoing June-quarter earnings.
ALSO READ: 'Rotation, Not A Bubble': Adrian Mowat On AI Trade Volatility And Road Ahead
Even so, BofA remains more conservative than the broader market. Consensus estimates currently peg Nifty's FY27 earnings growth at 13%, well above BofA's 10% forecast, suggesting further downgrades could be on the cards from other brokerages as the year progresses.
On flows, BofA struck a cautious note on foreign institutional investors (FIIs), saying outflows are unlikely to reverse given strong US treasury bond yields, even as the pace of selling could moderate from recent highs. India's FII ownership currently stands at 15.8%, among the lowest levels in almost two decades.
Despite the near-term caution, BofA characterised the current risk-reward setup as balanced with a bias towards upside, adding that it would "view any potential correction incrementally as an attractive opportunity."
Domestic institutional flows have continued to offset the FII selling pressure, with mutual funds averaging over $5 billion in monthly inflows despite the market correction. BofA's report flagged that any easing in geopolitical risks, particularly around the West Asia conflict, could further support the case for a Nifty recovery through the remainder of the year.
ALSO READ: Hike Or Hold? Fed's Warsh Has Markets Unsure
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
