Markets have shown signs of stabilization, but a recent adjustment from Nomura paints a cautious picture for India’s Nifty index. The international brokerage has revised its target for March 2026 to 24,970, reflecting concerns over Trump’s tariffs, potential earnings downturns, and worries about an economic slowdown. This new target suggests only a modest 3% increase from current levels by next March, indicating a subdued outlook for investors.
Nomura’s Revised Nifty Target and Economic Factors
Nomura’s updated forecast is anchored on a 19.5x valuation of FY27 Nifty earnings, estimating earnings per share at Rs 1,280. This projection incorporates a 5% reduction in current consensus estimates, leading the firm to adjust its target valuation multiple from 18.5x to account for declining yields, assuming minimal increases in risk premiums.
- Current Nifty Target: 24,970
- Projected EPS for FY27: Rs 1,280
- Valuation Multiple Adjustment: From 18.5x to 19.5x
Resilience in Indian Markets
Interestingly, Nomura highlights the resilience of the Indian market, noting that risk premiums have remained stable. Since the "Liberation Day" tariff announcement, key indices have rebounded, trading approximately 2% higher. In this timeframe, domestic sectors like consumer goods and financials have outperformed, while exporters, such as those in IT, metals, and pharmaceuticals, have lagged.
- Key Domestic Sectors Performing Well: Consumer, Financials
- Underperforming Export Sectors: IT, Metals, Autos, Pharmaceuticals
Trade Deal Prospects and Economic Stability
Nomura believes that India is relatively insulated from tariff-related uncertainties, particularly as discussions of a potential trade deal with the United States unfold. The firm notes that India’s current economic stance is strong, aided by declining commodity and oil prices, making it well-positioned for supply chain relocations.
However, the process of establishing a trade agreement is expected to be complex, as the U.S. aims to tackle structural issues, including non-tariff barriers, which could lead to delays in finalizing deals. Even with a reduction in U.S. tariffs, the overall environment remains uncertain.
Outlook on Earnings and Economic Growth
One of the primary reasons for Nomura’s downward revision of the Nifty target stems from concerns regarding potential downside risks to earnings growth. In the near term, the firm anticipates that equity valuations may find support due to falling bond yields, provided the equity risk premium remains stable. They assert that the recent global market corrections have not been excessive, despite significant disruptions to global economies.
Nomura’s Economics team has lowered growth expectations across various markets, now predicting 5.8% real GDP growth for FY26, which is below current consensus forecasts. This adjustment suggests there may be further downside risks to earnings estimates, with anticipated earnings growth aligning more closely with nominal GDP growth in the short term.
Summary
- Nifty Target for March 2026: 24,970
- Expected Real GDP Growth for FY26: 5.8%
- Earnings Growth Outlook: In line with nominal GDP growth
As investors navigate this landscape, they must stay informed about market conditions and economic indicators that could influence performance in the coming months.
