India's local demand is set for a strong recovery, with the Nifty expected to hit 27,609 in the next 12 months, a new report released on Tuesday said.
PL Capital's latest India strategy report cites a number of positive factors underlying this optimism, from low inflation and government tax reductions to a normal monsoon and recent rate cuts by the Reserve Bank of India, all combining to promote broad-based consumption growth.
Titled “Ready for next leg of growth,” the report notes that consumer price inflation has eased to 1.6 per cent, aided by food deflation, while rural incomes are benefiting from adequate rainfall.
The Rs 1,000 billion tax reduction announced for FY26 is expected to further stimulate demand. Additionally, the RBI’s 100 basis points rate cut is likely to lower EMIs, encouraging purchases of housing, cars, and personal loans.
Future GST 2.0 reforms that will simplify and cut down on tax slabs are expected to bring down the cost of day-to-day products like cars, durables, medications, and essential commodities, giving consumption another fillip.
Despite the challenges of U.S. tariffs and foreign investor outflows of Rs 410 billion, Indian markets have been resilient in recent times. Corporate earnings too have been stable, with minor deviations from expectations. PL Capital marginally updated its Nifty earnings per share (EPS) estimates for FY26 and FY27 but continues to anticipate a robust earnings growth of 13.2 per cent CAGR for FY25–27.
Presently, the Nifty is valued at 18.9 times one-year forward earnings per share, only slightly lower than its 15-year historical average. Applying the long-term valuation multiple on FY27 EPS, PL Capital established a fresh Nifty target of 27,609 from 26,889 previously.
In the sectoral space, the report continues to be bullish on banks, healthcare, consumer goods, telecommunication, automobiles, and capital goods while maintaining underweight positions on IT services and commodities.
The report stressed that triggering consumption will be crucial to maintaining India's growth momentum. It also pointed out structural growth drivers, such as defence, infrastructure, energy management systems, hospitals, and power transmission, which are likely to contribute powerfully to the economy.
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