BNP Paribas said in its India Strategy 2026 report that it expects the Nifty 50 to deliver about 15% upside from current levels, with large caps continuing to outperform mid- and small-cap stocks as valuations remain more comfortable at the top end of the market.
The brokerage said policy actions taken in 2025, including income tax cuts, a GST rate reduction and a cumulative 125 basis point cut in interest rates, are starting to show early positive results and should lift growth and earnings in 2026, particularly for domestically oriented sectors. “Our confidence on FY27 earnings has increased and we expect Nifty 50 returns to be earnings led,” the report said.
Largecaps, domestic sectors in focus
BNP Paribas said it is more positive on private sector banks, passenger vehicle makers, telecom companies and consumer staples, arguing that these sectors are best placed to benefit from improving consumption, easier liquidity and operating leverage. It expects largecap stocks to continue outperforming, noting that mid and smallcap indices still trade at significant premiums to the Nifty 50 despite recent underperformance.
In financials, the brokerage said it expects a rebound in earnings momentum for private sector banks in FY27, supported by credit growth, GST rationalisation benefits and strong balance sheets. Its top bank picks include HDFC Bank, ICICI Bank and Axis Bank, while SBI Life Insurance is its preferred name in insurance.
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In autos, BNP Paribas said reduced GST rates have lowered on-road prices and boosted demand, setting the stage for margin expansion in 2026. Maruti Suzuki and Mahindra & Mahindra are its top passenger vehicle picks.
Telecom, staples and other top buy ideas
The brokerage remains positive on telecoms, citing expected tariff hikes, improving free cash flows and potential industry catalysts. Bharti Airtel and Reliance Industries are its preferred telecom plays.After a weak 2025, BNP Paribas has turned positive on consumer staples, pointing to GST cuts, a favourable earnings base and macro tailwinds such as lower food inflation and improving rural sentiment. Britannia Industries, Hindustan Unilever and Doms Industries feature among its preferred staples, while Titan and Swiggy are favoured names in the broader consumer space.
Beyond these, the brokerage’s top buy ideas list also includes Infosys, Amber Enterprises, JK Cement, Aster DM Healthcare and Aurobindo Pharma, based on a mix of earnings visibility, sector tailwinds and valuation comfort.
Valuations still rich, risks remain
BNP Paribas cautioned that Indian equity valuations remain elevated, with the Nifty 50 trading above its long-term average, limiting the scope for further re-rating. As a result, it expects market returns in 2026 to largely mirror earnings growth rather than be driven by multiple expansion.
It also flagged risks to its positive view, including limited fiscal headroom for further policy stimulus, a strong supply of equity through IPOs and stake sales, uncertainty around India-US trade negotiations, currency depreciation and the possibility that consumption momentum fades after pent-up demand plays out.
Even so, BNP Paribas said India’s strong domestic flows and improving earnings outlook could make it an attractive hedge if global investor enthusiasm for artificial intelligence-linked trades cools, reinforcing its constructive stance on Indian equities into 2026.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)