Nifty at 24,000? LTCG tax cut hopes, peak FII selling, cheaper valuations: Stock market outlook

A possible long-term capital gains tax (LTCG) cut for foreign institutional investors, the fall in global yields and expectations of the rupee holding up on central bank intervention may lend support to the domestic stock market, which is seeing a strong earnings growth momentum.

Nomura sees this momentum to take Nifty past 24,000 by March 2027 as relative sentiment towards Indian equities among foreign investors improve, driving portfolio flows in the near term. The expectation is supported by low starting expectations, reflected in valuations below post-pandemic averages across most sectors, and by the correction in artificial intelligence (AI) stocks.

From a longer-term perspective, Nomura said market concerns around geopolitical and technological uncertainty persist, weighing on long-term growth expectations.

For now, Q2 earnings season is off to a good start, after a strong Q1. Nomura said with the season halfway through, normalised PAT for its coverage universe grew 34 per cent year-on-year (YoY), an 18 per cent beat versus consensus. Excluding oil & gas sector, normalised PAT grew 29 per cent YoY, still a 5 per cent beat to consensus expectations.

Nomura said the demand environment has held up well, reflected in strong revenue growth across segments, with some compression in Ebitda margin on higher commodity prices. The cyclical recovery following the fiscal and monetary stimulus of 2025 has been stronger than Street expectations, Nomura said.

"Consensus expects earnings growth to slow in 2HFY27E on a high base and headwinds from elevated interest rates and commodity prices. For our universe, normalised y-y PAT growth for 2HFY27F is at 3 per cent, against 34 per cent in Q2 and 17 per cent in H1FY27," Nomura said.

On flows, FIIs have sold $5 billion in the fortnight ending October 15, the heaviest fortnightly
outflow in 12 fortnights — taking net selling since September 15 to $8.8 billion. The selling intensity has since eased over the past 15 days, Nomura said.

Nomura said oil prices remain a concern, although they have also corrected 7 per cent from the recent peak.