Nifty at 28,700 by FY27? Capex, Q2 earnings other factors that may keep bulls in charge

Indian benchmark indices are experiencing profit booking at higher levels, after hitting 52-week highs in the recent rally, adding to the wait of investors for new life-time highs. Traders are expecting when Sensex will claim 86,000 mark, while Nifty to hit 26,300 but Sensex is failing to sustain above 85,000 and 26,000 has become major hurdles for the Indian benchmark indices.

However, market participants are expecting Indian equity markets to continue their rally in a longer-term considering supportive Q2 earnings by India Inc, the US trade deal developments with India and China, robust growth prospects of the Indian economy, lower crude oil prices. Such factors may trigger revival of FIIs inflows to India.

After 12–15 months of underperformance following the post-Covid boom, the economy is emerging from a phase of normalization, with consumption and capex expected to revive as fiscal and monetary measures come into effect, said Vikram Kasat, Head Advisory, PL Capital.

Indian equity benchmark indices are approaching record highs as festive and wedding season demand, stronger domestic sentiment, and optimism over a potential US-India trade deal drive momentum, he said. "Nifty is trading at 19 times 1-year forward EPS, which is at 1 per cent discount to 15-year average and is at a discount of 5.5 per cent to 10-year average PE of 20.1 per cent."

India has remained an outperformer among the emerging markets (EMs) in the longer period. Market participants believe that India is likely to outperform peers on both micro and macro level.

Q2FY26 results declared so far indicate a relatively stronger-than-expected traction for capex growth in the economy in the form of strong beat in volume growth for cement, steel and cables; strong balance sheet capex growth as well as forward guidance by large industrials and outperformance of corporate loan growth by large banks, said ICICI Securities.

The MSCI EM Index tracks large- and midcap stocks across emerging economies, with the largest weights contributed by companies from China, Taiwan, and India, respectively. Over the past decade, MSCI India significantly outperformed, clocking an 8.6 per cent CAGR while MSCI EM clocked a 5.9 per cent CAGR.

In contrast, China, the region’s dominant market experienced a pronounced slowdown, posting a 4.5 per cent CAGR and underperforming, which further boosted India’s relative performance. Notably, India’s outperformance was largely concentrated in the second half of the decade.

While geopolitical risks remain a key concern in the near term, India’s improving corporate earnings outlook, sustained domestic inflows, superior RoEs among EM peers, and the historically underweight positioning of foreign investors, coupled with a weak base in CY24 and CY25YTD FII flows, suggest a higher likelihood of upside from current levels, said Motilal Oswal Financial Services.

India’s rising dominance within EM is expected to continue, supported by its diversified investment opportunities and deepening market, making it increasingly difficult for global investors to ignore for long," it said. "The expanding investable universe, with several new-age themes gaining prominence, fiscal and monetary tailwinds, provides a constructive outlook for the Indian markets."

On the other hand, consumption demand has been mixed with selective discretionary consumption looking strong while other categories have shown steady to weak demand. Software services exports growth was weak, although better than expectations, along with a cautionary outlook by large IT companies, ICICI Securities said.

Kasat from PL Capital valued value Nifty50 at 15-year average PE of 19.2 times with September 2027 EPS of Rs 1,499 and arrive at a target of 28,781 implying an 11 per cent, supported by improving macro tailwinds and expanding opportunities for active stock pickers. SBI, Tata Steel, IDFC First Bank, Hindustan Aeronautics, JSW Energy, Delhivery and MCX are among his top picks.