The Nifty recently hit a fresh high, but the rally could surge higher. A recent report by Nomura indicates that the benchmark Index may scale up to 29,300 by December 2026, pointing to about 12% gains. The report also stated that some parts of the market however, look expensive and investors will need to rely on careful stock picking, even though domestic flows have stayed strong and earnings estimates for the next few years have already been cut.
However, the brokerage house cautioned that private capex continues to be muted, and unless investment spending revives, this rally could lose steam before it takes off.
Nomura’s Nifty forecast: Key factors to watch
Nomura’s target of 29,300 is based on a model that uses Dec-2027 forward earnings and a low-20s valuation multiple. According to the brokerage, the Nifty can reach this level if inflation stays low, the RBI cuts rates as expected, and domestic demand remains steady.
The brokerage expects two repo rate cuts one in December 2025 and another in February 2026, bringing the repo rate to around 5.00%. It also expects CPI to ease to about 1.9% in FY26, giving policymakers space to reduce rates. If borrowing costs fall, Nomura believes valuations will remain supported.
Nomura on earnings outlook: Gains possible but risks remain
Nomura expects low double-digit earnings growth in FY26, supported by a recovery in commodity-linked sectors. However, the brokerage said earnings estimates for FY26–FY28 have already been cut and could be lowered again if private investment does not improve or if global trade slows.
The report also said some parts of the market have seen valuations stretch considerably due to strong domestic buying. These pockets may be vulnerable if sentiment weakens.
Nomura on India: Capex remains the key missing piece
Private capex is still the weakest part of the economic cycle. Nomura’s data showed that new project announcements and manufacturing GVA continue to lag behind regional peers. Public capex has held up, but private investment has not followed.
The brokerage warned that unless private capex grows meaningfully through FY26, the earnings upgrades implied in its forecast may not materialise, and the Nifty target may need to be re-evaluated.
Nomura on India: Growth cooling, but consumption steady
Nomura said growth has slowed, but India still compares well with other major economies going into 2026. Private consumption makes up nearly 61% of GDP, and the brokerage expects it to remain the lynchpin of overall demand.
Indicators such as GST collections, e-way bills, toll movements and POS transactions show a mix of strength and mild softness, but overall activity remains stable.
The report noted that household debt has climbed to above 40% of GDP from under 35% before the pandemic. This rise helped credit growth but also requires careful monitoring. Rural real wages have turned positive, which should support spending outside metro areas.
Nomura on India: Domestic flows strong
Nomura said domestic investors continue to be the main support for the market. It estimated that household inflows accounted for about 13% of gross financial savings in FY25, giving equities a reliable base even when foreign flows stay weak.
Foreign investors have still not returned in a big way. The brokerage said their comeback will depend on lower global volatility and reduced risk premia. A mild improvement is possible, but Nomura does not expect foreign flows to drive the market on their own. A partial improvement is possible but not integral to the base case.
Nomura on external risks that can change the picture
Nomura flagged several global risks that could hurt the outlook:
• rising global risk premia
• a renewed tariff cycle
• slower growth in the US or China
• a sharp rise in commodity prices
• a wider trade deficit
Any of these, the brokerage said, could lead to earnings cuts and put pressure on valuations.
