Sensex, Nifty may deliver negative returns in 2026, says poll-based report
Stock market: The continued large FPI outflows from the equity market reflects the steady deterioration of relative returns amid continued compression of relative earnings growth expectations.
- May 28, 2026,
- Updated May 28, 2026 11:56 AM IST
A poll based on analyst projections suggested benchmark indices Sensex and Nifty may deliver negative returns in 2026, due to persistent foreign fund outflows, expensive valuations and India’s limited participation in the global artificial intelligence-led rally. According to the May 15-27 Reuters poll of 24 analysts, the Nifty 50, currently down about 8.5 per cent in 2026, is projected to end the year at 26,000, implying an annual decline of around 0.5 per cent and marking its first yearly loss since 2015. The Sensex is seen at 84,150 by end-2026.
On Wednesday, the BSE Sensex closed at 75,867.80, down 141.90 points or 0.19 per cent. Nifty ended at 23,907.15, down 6.55 points or 0.03 per cent. US markets settled higher, while Brent oil futures fell 4 per cent overnight.
In a strategy note this week, Kotak Institutional Equities expected FPI flows to stay muted, given India’s low attractiveness versus other EM markets due to weaker relative FY2027E earnings growth in terms of quality and quantity, ‘negative’ exposure to the ongoing AI and semiconductor cycle that may continue for another 1-3 years and ‘negative’ exposure to commodities, especially crude oil and natural gas.
"Other EM markets offer high exposure to the AI and commodity cycles. The continued large FPI outflows from Indian equity markets reflect the steady deterioration of relative returns amid continued compression of relative earnings growth expectations," Kotak said.
JM Financial said the domestic economy is reflecting selective resilience, with auto demand remaining remarkably strong, credit growth accelerating further and mutual fund flows stabilising, even as infrastructure ordering continued to contract, consumer sentiment softened, and commodity input costs intensified. "Hopes of a US-Iran peace deal has since pulled crude price back, but structural pressure on India’s external account persists," it said.
Emkay Global said a recent US bond yield spike is a headwind for Indian markets. "Overall, market appears to be pricing in a post-war normalization in estimates and multiples, however, if hostilities continue and the SoH remains shut beyond the next 4-6 weeks, both earnings and valuation assumptions could come under pressure," it said.
Earlier this month, Morgan Stanley suggested a Sensex target of 89,000, assuming continuation in India's gains in macro stability, increased private investment, and a positive gap between real growth and real rates.
"Robust domestic growth, steady global growth, and lower oil prices from the current levels are also part of our assumptions. We assume a benign monetary policy. We do not anticipate a bunching of issuances, and the retail bid keeps its nose ahead of the supply. Sensex earnings compound at 16 per cent annually through F2029," it said on May 12.
A poll based on analyst projections suggested benchmark indices Sensex and Nifty may deliver negative returns in 2026, due to persistent foreign fund outflows, expensive valuations and India’s limited participation in the global artificial intelligence-led rally. According to the May 15-27 Reuters poll of 24 analysts, the Nifty 50, currently down about 8.5 per cent in 2026, is projected to end the year at 26,000, implying an annual decline of around 0.5 per cent and marking its first yearly loss since 2015. The Sensex is seen at 84,150 by end-2026.
On Wednesday, the BSE Sensex closed at 75,867.80, down 141.90 points or 0.19 per cent. Nifty ended at 23,907.15, down 6.55 points or 0.03 per cent. US markets settled higher, while Brent oil futures fell 4 per cent overnight.
In a strategy note this week, Kotak Institutional Equities expected FPI flows to stay muted, given India’s low attractiveness versus other EM markets due to weaker relative FY2027E earnings growth in terms of quality and quantity, ‘negative’ exposure to the ongoing AI and semiconductor cycle that may continue for another 1-3 years and ‘negative’ exposure to commodities, especially crude oil and natural gas.
"Other EM markets offer high exposure to the AI and commodity cycles. The continued large FPI outflows from Indian equity markets reflect the steady deterioration of relative returns amid continued compression of relative earnings growth expectations," Kotak said.
JM Financial said the domestic economy is reflecting selective resilience, with auto demand remaining remarkably strong, credit growth accelerating further and mutual fund flows stabilising, even as infrastructure ordering continued to contract, consumer sentiment softened, and commodity input costs intensified. "Hopes of a US-Iran peace deal has since pulled crude price back, but structural pressure on India’s external account persists," it said.
Emkay Global said a recent US bond yield spike is a headwind for Indian markets. "Overall, market appears to be pricing in a post-war normalization in estimates and multiples, however, if hostilities continue and the SoH remains shut beyond the next 4-6 weeks, both earnings and valuation assumptions could come under pressure," it said.
Earlier this month, Morgan Stanley suggested a Sensex target of 89,000, assuming continuation in India's gains in macro stability, increased private investment, and a positive gap between real growth and real rates.
"Robust domestic growth, steady global growth, and lower oil prices from the current levels are also part of our assumptions. We assume a benign monetary policy. We do not anticipate a bunching of issuances, and the retail bid keeps its nose ahead of the supply. Sensex earnings compound at 16 per cent annually through F2029," it said on May 12.