Nifty at 25,900 by March 2027? Nomura keeps index target, shares key themes to watch

Brokerage Nomura, in its latest India equity strategy note, said the Indian stock market has underperformed global peers, with the Nifty currently trading at 18.1 times one-year forward earnings, close to the low end of the 18-22 times valuation range seen over the past four years. This made the foreign brokerage retain its March 2027 Nifty target of 25,900. The target suggests 7.22 per cent potential upside from Tuesday's closing level of 24,154.90. Nomura said it is adopting a bottom-up, stock-specific approach to portfolio construction.

Key themes to watch

Its sector stance is built around a preference for established exporters, data centre and power infrastructure investment, and AI-driven opportunities for Indian IT services, while remaining cautious on consumption.

Nomura said it is constructive on auto ancillaries, engineering and manufacturing, and pharmaceuticals, and is also positive on financials and IT services, supported by what it sees as attractive valuations.

The brokerage said the key themes underpinning its sector view include a preference for established exporters such as auto components, pharmaceuticals and power equipment companies with proven credentials. It also pointed to strong structural tailwinds for data centre and power infrastructure investment from capacity build-out, and to medium-term revenue uplift for Indian IT services from AI implementation mandates. At the same time, it expects a slowdown in consumption growth and margin pressure for the consumption segment, while limited government support to industry, due to fiscal constraints, restricts the scope for policy-driven stimulus.

Q1 results strong

Nomura said corporate earnings for 1QFY27 came in ahead of Street expectations. For Nifty 50 companies, year-on-year earnings growth was 4 per cent, exceeding consensus estimates by 1 per cent. However, it said the headline growth figure was distorted by the impact of oil price movements and one-off items, including at Reliance Industries and ONGC. Excluding these effects, the brokerage estimated underlying earnings growth was in the low teens, which it said was a more representative picture of corporate India’s operating momentum.

Consensus estimates down YTD

Nomura added that, year-to-date, Bloomberg consensus earnings estimates for the BSE 200+ universe have been revised lower by 3.7 per cent for FY27, while FY28 estimates have remained largely unchanged. Aggregate earnings through the results season have also held steady. Nomura said corporate earnings momentum remains resilient, supported by strong cyclical tailwinds from tax cuts and monetary easing, including liquidity injection and lower interest rates, and added that this is adequately reflected in current consensus expectations.

Corporate earnings-to-GDP ratio elevated

Nomura also said India’s corporate earnings-to-GDP ratio is elevated, and that prevailing consensus expectations for earnings growth assume this ratio will remain elevated. In its view, the key factor that can sustain earnings growth above nominal GDP growth is a meaningful pick-up in the investment cycle and domestic manufacturing activity. It added that sustainably elevated crude oil prices and geopolitical tensions remain downside risks to the corporate earnings outlook, as they could pressure profitability and delay a recovery in the investment cycle.