Sensex at 98,500, Nifty 29,500 in 2026? Murphy’s law played out in 2025, strong returns ahead

“Anything that can go wrong will go wrong,” as Murphy’s Law goes. ICICI Direct said Indian equities in 2025 reflected this classic case, as a series of unforeseen developments weighed on market performance. The brokerage noted that despite a favourable long-term backdrop, equities delivered single-digit returns during the year amid geopolitical tensions in the first half, tariff-related disruptions and a prolonged lack of resolution on key global issues.

It added that these factors heightened economic anxiety and diverted liquidity towards other equity markets and asset classes, particularly as Indian markets continued to trade at relatively rich valuations ahead of a meaningful revival in corporate earnings.

ICICI Direct said domestic equities underperformed global equities and precious metals such as gold and silver in 2025, but called the outlook as constructive with corporate earnings approaching a recovery phase.

Rolling forward its valuation framework and introducing FY28 estimates, the brokerage said it valued the Nifty at 29,500, based on a 21 times price-to-earnings multiple on FY28 earnings. The corresponding target for the Sensex is pegged at 98,500. ICICI Direct expects the market to deliver healthy double-digit returns over the next 12 months.

The brokerage also said that with valuations turning more rational in the mid- and small-cap segments and growth prospects remaining strong, mid- and small-cap stocks were likely to deliver stronger returns in CY26E.

ICICI Direct highlighted BFSI as a key area of opportunity, citing an expected revival in credit growth, strong asset quality and valuations around historical averages, which it said offered an attractive risk-reward, particularly in PSU banks.

For IT, the brokerage said recent corrections had made valuations more reasonable and that growth was expected to bounce back in CY26E, warranting a relook at the sector. In capital goods, ICICI Direct pointed to momentum in new projects and tenders, which indicated strong ordering activity in CY26E.

On real estate, the brokerage said the sector had a long runway for growth and could potentially expand threefold over the next five years.