The domestic brokerage in its latest India Strategy Report said that the prolonged phase of consolidation seen in Indian stock markets appears to be setting the stage for renewed optimism as structural drivers remain firm despite recent earnings recalibrations.
Benchmark index Nifty 50 has traded within a narrow 5-6% range over the past nine months. This reflects a period of adjustment amid global geopolitical uncertainties, Trump’s tariff flipflops and 9–9.5% earnings per share (EPS) moderation for FY26 and FY27, PL Capital said.
‘Early signs of revival are emerging’
The brokerage, however, highlighted that early signs of revival are emerging. “Corporate performance has remained resilient, with sales, EBITDA and profit after tax for the coverage universe growing 9.9%, 16.4% and 16.7% year-on-year, respectively, even as EPS estimates were trimmed. While FY26 EPS growth is expected at a measured 3.8%, the medium-term earnings trajectory remains strong, with an estimated 16.3% CAGR over FY26–28, indicating that the current phase is more of a reset than a reversal,” it said.
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PL Capital sees Nifty currently trading at 19.1x one-year forward earnings, broadly in line with its 15-year average.
Nifty targets
Speaking about its base case 12-month Nifty 50 target of 27,958, the report stated this target assumes the index trades at 18.3x, reflecting a 5% discount to long-period averages, based on December 2027 EPS of 1,525. The base case target of 27,958 implies an upside potential of nearly 10% from the benchmark index’s previous closing level of 25,424.65. Meanwhile, in a bullish scenario, PL Capital sees Nifty 50 trading at a 20x multiple and rising to 30,497. This marks an upside potential of nearly 20% from the current levels. On the other hand, it sees Nifty 50 at 26,486 in a conservative bear case scenario.
“A defining catalyst for the next growth cycle has been India’s accelerated progress on trade diplomacy,” the brokerage said, adding that the recently-concluded India-EU Free Trade Agreement (FTA) marks a “historic breakthrough”.
Which sectors benefit from India-EU trade deal?
Labour-intensive sectors like textiles and apparel, marine products, leather and footwear, gems and jewellery, chemicals, machinery and electrical equipment are set to benefit significantly from the trade deal, PL Capital added.
It also explained that the services component of the agreement opens new frontiers, beyond the merchandise trade. “IT and ITeS firms gain improved market access and visa clarity, while financial services, professional services, telecom, education and digital trade benefit from regulatory alignment and cooperation frameworks. Importantly, collaboration in advanced semiconductors, chip design and critical industrial electronics strengthens India’s manufacturing ambitions,” it said.
‘Indian equities entering a multi-year compounding cycle’
India is transitioning from a cyclical recovery phase to a structurally stronger growth trajectory, said Amnish Aggarwal, Director Research, Institutional Equities, PL Capital. “What differentiates this cycle is the depth of policy execution, rising private sector participation and the scale of opportunity emerging across manufacturing, digital infrastructure and domestic consumption. Markets may have paused, but the underlying economic engine continues to gain strength,” he added.
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Aggarwal added that Indian equities are entering the early stages of a “multi-year compounding cycle”.
The India-US interim trade framework that effectively reduced tariffs on Indian exports to the US from 50% to 18% has also removed a significant overhang for the exporters. “The recalibration lowers uncertainty across sectors such as gems and jewellery, textiles, aircraft parts, auto components and select industrial goods,” the brokerage said.
These two trade breakthroughs complement the government’s domestic growth agenda, according to PL Capital.
Which sectors benefit from Union Budget 2026?
It added that Budget 2026-2027, which was presented by Finance Minister Nirmala Sitharaman earlier last month, continued to prioritise capital expenditure.
“Strategic thrust areas include defence manufacturing, data centres, renewable energy, high-speed rail corridors, semiconductor fabrication, electronics components under the PLI framework, aerospace and speciality chemicals. Customs duty exemptions on aircraft components and extended incentives for data centres signal India’s intent to position itself as a global hub for manufacturing and digital infrastructure,” it added.
According to PL Capital, banks and diversified financials are positioned to benefit from credit growth normalisation toward 13–14% and stable asset quality. It added that capital goods and engineering companies are likely to ride the infrastructure and defence wave. “Consumer demand is gradually reviving amid GST rationalisation, lower inflation and easing rates, while healthcare continues to offer structural growth supported by domestic and speciality segments,” it further said.
To conclude, PL Capital’s strategy remains constructive on banks, diversified financials, healthcare, consumer, automobiles and capital goods/defence, with a relatively cautious stance on IT services and commodities.
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Over the next five to ten years, the domestic brokerage sees asset creation and technology-led industries driving India’s next phase of expansion. “Improved global market access, lower tariff barriers and stronger supply chain integration should enhance both export competitiveness and domestic manufacturing capabilities. While near-term risks such as global rate movements, climatic disruptions and technology-led shifts in employment warrant monitoring, the structural trajectory remains favourable. As trade corridors reopen, policy support strengthens, and earnings momentum gradually rebuilds, India stands at the cusp of a renewed growth cycle,” it concluded.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)