Nifty To Touch 29,000 In 2026: BofA Predicts 11.4% Upside; Backs Financials, Real Estate Sectors

Bank of America in its report on Thursday projected a steady but earnings-reliant market, with the Nifty likely to reach 29,000, translating to an upside of 11.4%.

The brokerage in its report said it continues to prefer large-caps over small and mid-caps, echoing the 2025 trend, though it notes that parts of the SMID universe are beginning to show selective opportunities, particularly in Financials, IT, Chemicals, Jewellery, Consumer Durables and Hotels.

According to BofA, risks are skewed to the upside, driven by the broader events calendar, anticipated policy continuity and the possibility of foreign institutional outflows reversing. However, the downside, if it emerges, could disproportionately affect SMID caps given their more elevated valuations and sharper reaction to risk sentiment.

Despite the constructive market view, BofA sees no further scope for valuation expansion. The Nifty currently trades around 21 times one-year forward earnings, roughly one standard deviation above long-term averages. The brokerage notes that such elevated multiples have historically been sustained only during phases of robust earnings upgrades. With calendar year 2026 unlikely to deliver such momentum, valuations are expected to remain capped. In this scenario, equity returns will largely mirror earnings, making profit growth the critical driver of market performance next year.

On the earnings front, the street has already cut financial year 2026 and fiscal year 2027 Nifty earnings estimates by 11% and 6% respectively, broadly in line with BofA’s expectations. These cuts are likely to moderate now that consensus growth estimates of 6% for financial year 2026 and 16% for fiscal 2027 sit close to the brokerage’s expectations of 7% and 14%.

BofA expects earnings growth to accelerate into fiscal year 2027, supported by firmer loan growth for Financials, improvement in discretionary spending on the back of expected GST reductions, telecom tariff hikes, strength in non-ferrous metals, and a favourable base in IT and Staples.

The events calendar for 2026 adds to the upside bias. Potential rate cuts by both the RBI and the US Federal Reserve, fewer large state elections, and the submission of the next Pay Commission report could support sentiment.

Weaker global yields and a softer US dollar could also help reverse foreign outflows, while India’s potential reform acceleration would provide an additional tailwind. The downside risks remain present but are not part of BofA’s base case: further rupee depreciation, a spike in crude oil prices, delay in a US-India trade agreement and a correction in US equities.

Strategically, BofA maintains an overweight on rate-sensitive sectors and well-off consumption. Financials, Real Estate, Passenger and Commercial Vehicles, and regulated Power utilities top their list of preferred sectors. The brokerage expects affluent consumption to outperform mass consumption, supported by stronger balance sheets and more resilient spending power.

On the flip side, capital expenditure growth is expected to slow meaningfully for both the central and state governments due to limited fiscal headroom. This underpins BofA’s underweight stance on Industrials and Cement, though it continues to favour select capex-linked companies with clear growth visibility.

Within global cyclical sectors, the brokerage prefers Pharma and Aluminium, while remaining underweight on IT, Steel and Energy. It also maintains a preference for defensives such as Telecom and Hospitals, which continue to offer a favourable risk-reward balance in a year where earnings, rather than valuations, will set the tone for market performance.