International brokerage house Jefferies predicts that the Nifty may climb another 10% from current levels. They have set a Nifty target of 28,300 by December 2026. According to the brokerage, the move higher will be driven by an improvement in corporate earnings rather than valuation expansion. But Jefferies cautioned that index-level gains may remain limited due to persistent equity supply pressures.
As per the report, equity issuance continues at around $7–8 billion per month, led by IPOs, block deals, and promoter and private equity exits. This steady supply is expected to keep the broader market range-bound. Against this backdrop, Jefferies says returns in 2026 are more likely to come from lending financials, autos, cement, telecom, real estate, and utilities, where earnings growth and valuations are seen as more supportive than the index average.
Jefferies on earnings recovery seen as the key driver
According to Jefferies, India’s earnings cycle is turning. The brokerage expects MSCI India EPS growth to rise from around 8–9% in FY26 to about 13–14% in FY27. This improvement, as per Jefferies, should help India perform better than many Emerging Markets in CY26.
Banks are likely to benefit as policy rates approach a bottom, while autos, power, cement, and telecom should see faster profit growth supported by low base effects and policy measures. Jefferies also notes that a gradual rise in inflation could help revenues and margins instead of hurting them.
Jefferies on why Nifty may struggle to move sharply
Jefferies has set the December 2026 Nifty target at 28,300, based on a 20x PE multiple on December 2027 earnings, which already factors in a 5% valuation cut. As per the brokerage, the Nifty continues to trade above its long-term average, even though its valuation premium over Emerging Markets has cooled to around 64%, close to historical norms.
Strong domestic inflows continue to support the market, but Jefferies warns that the scale of equity issuance remains a key ceiling. With a US$50–70 bn equity supply pipeline expected in 2026, the brokerage does not see room for sustained index rerating.
Jefferies on sectors set to outperform
Along with the Index, here are the key sectors that Jefferies expects will outperform –
#1: Lending Financials
Jefferies has its highest conviction on lending financials, with an overweight position compared with the MSCI India benchmark. According to the report, credit growth is expected to average 11–13% over FY26–FY28, supported by tax and GST cuts and rising lender comfort with unsecured loans.
Jefferies also points to improving margins as deposits reprice and CRR cuts flow through. Asset quality trends are strengthening, keeping credit costs under control. Despite strong performance in 2025, valuations remain below long-term averages, as per the brokerage.
#2: Autos and Consumer Discretionary
Autos remain Jefferies’ preferred consumption play. The brokerage says GST cuts and low base effects should support demand recovery and earnings growth. The upcoming 8th Central Pay Commission, expected to roll out from FY27/FY28, is seen as an additional support for discretionary spending.
Jefferies also highlights the continued preference for higher-end vehicles, which supports profitability. Auto earnings are expected to improve sharply in FY27, while broader consumer discretionary profits could grow around 23%, according to the report.
#3: Cement
Jefferies rates cement as one of the strongest earnings stories. The brokerage expects 25%+ EPS growth in both FY26 and FY27, driven by margin recovery and a turnaround in pricing, which is currently near multi-year lows. Demand linked to housing and infrastructure remains a structural support, as per Jefferies.
#4: Telecom
Telecom is Jefferies’ preferred mass consumption play over traditional staples. According to the report, the sector is well placed to raise tariffs, improve ARPU, and generate strong cash flows. Jefferies expects 20%+ earnings growth in FY26 and FY27, a rare profile among large-cap sectors. Improving rural incomes add to the demand outlook.
#5: Real Estate
Jefferies believes the housing cycle is not over. Inventory levels are near 14-year lows, developer leverage remains low, and mortgage rates could fall to around 7.0% in the first half of 2026, as per the brokerage. This is expected to revive mid-income demand and lift housing volumes by about 10%.
Property stocks underperformed the Nifty by 25 percentage points in 2025, despite strong sales growth, creating a valuation opportunity. Jefferies also expects margins to improve as recent pre-sales begin to flow into profits.
#6: Utilities and Power
Jefferies views utilities and power as recovery plays. The sector was hit by weak demand due to weather disruptions over the past two years, but earnings are expected to improve from a low base. According to the brokerage, higher investment linked to data centres, EVs, and renewable energy should support growth into FY27.
Jefferies is not calling for a runaway bull market in 2026. According to the brokerage, earnings recovery and sector selection, rather than index momentum, will drive returns. With equity supply limiting headline gains, Jefferies advises investors to focus on sectors where profit growth is expected to stay ahead of the broader market.