Sensex climbs mt 86k, Nifty hits 26,300: key factors behind rally, targets for 2026 & more

Indian benchmark indices continued to rally higher on Thursday as NSE's barometer Nifty50 index scaled its new highs at 26,306.95 in the early trade. Similarly, BSE's benchmark index Sensex also scaled mount 86,000 for the first time. Both the indices scaled new highs after 14 months as the buoyed sentiments prevailed.

A host of factors, at both domestic and global levels, pushed the benchmark indices higher. At the macro level, optimism of rate cuts by the US Federal Reserve in its upcoming meeting in December supported the sentiments. Along with it, the hopes of ending Russia-Ukraine war and falling oil prices also pushed the markets up.

Adding to that, traders are expecting a trade truce soon between the US and India, supported by buying sentiments as Foreign investors turned buyers over valuations concerns eased after Wednesday's upmove. Traders are also anticipating another rate cut by the Reserve Bank of India also in its upcoming MPC meet, supporting the bullish move.

Besides these indicators, long-term factors including income tax relief, rationalization of GST rates and better than expected quarterly earnings by India also led to revival of the bulls. Buying led by domestic institutions and rally in the global stocks also acted as catalysts for the bulls at the Dalal Street.

Market participants continue to remain positive on Indian equities. Overseas brokerage firm JP Morgan has gained Nifty50 base-case target to 30,000 by end of 2026. It continued to be positive on domestic themes over exports and forecasts MSCI India earnings growth of 13 per cent in 2026 and 14 per cent in 2027.

Its notes tha valuations remain premium for Indian market but the gap versus other emerging markets (EMs) has narrowed below long-term average. JP Morgan says that India-US trade resolution could trigger re-rating and believe that the downgrade cycle is over. MSCI India's premium valuation seen as backed by strong fundamentals and resilient domestic flow, the brokerage notes.

The market’s uptrend is attributed to resilient second-quarter corporate performance, optimism for tariffs resolution with the US, and improving prospects for domestic demand during the ongoing festival and wedding season, aided by GST rationalisation, said PL Capital. We saw Nifty EPS upgrade for the first time since August 2024."

"We believe economic momentum will be led by domestic demand from income tax rate cuts; 100bps rate cut; normal monsoons; 12-year low inflation; and GST rates rationalization," it said. In sectoral trends, it prefers banks, NBFCs, select consumer staples, discretionary, defence, and ports are favoured themes for 2026.

The brokerage values Nifty at the 15-year average PE of 19.2 times with September 2027 EPS of 1,515, resulting in a 12-month target of 29,094, up from the previous target of 28,781. In the bull case, it values Nifty at PE of 20.2 time and arrive at bull case target of 30,548 , while in the bear case, Nifty can trade at a 10 per cent discount to LPA with a target of 26184.