The brokerage believes the U.S.-Iran ceasefire could mark the beginning of a broader peace settlement, helping restore normalcy in energy markets. This, in turn, is seen as a key trigger for a breakout in domestic equities, supported by expected earnings per share growth of 13% to 15% for the Nifty between FY25 and FY27 and valuations of around 19x FY27 earnings. Emkay has retained its Nifty target of 29,000 but shifted the timeline to March 2027 from December 2026 earlier.
It has also tweaked its model portfolio by increasing exposure to cyclical sectors such as materials and industrials, while cutting weights in technology, healthcare and telecom. Among key additions are HPCL, Aditya Birla Real Estate and Ultratech Cement.
According to the brokerage, the ceasefire signals the end of the Gulf conflict and could bring a “peace dividend” for India. Brent crude is expected to settle in the $75 to $80 range in the near term, with further downside possible as traffic through the Strait of Hormuz normalises and damaged infrastructure is restored over the next two to three quarters. In the interim, India’s macro indicators such as the current account deficit, inflation and fiscal balance may remain under pressure through the first quarter of FY27 until energy markets stabilise. However, Emkay expects a recovery thereafter, with minimal chances of retail fuel price hikes. The rupee is likely to stabilise around Rs 91 per dollar in the near term and could strengthen further if foreign portfolio inflows return, while the 10-year bond yield is seen easing to 6.7%.
On earnings, Emkay expects a weak fourth quarter for FY26, with one-off factors such as inventory losses and forex hits weighing on profitability. Pressure on bank margins following the December 2025 rate cuts is also likely to impact results. The Nifty is expected to post a modest 2% year-on-year profit growth for the quarter, while the BSE500 may see 9% growth, both lower than the previous quarter. Within its coverage universe, profit growth is estimated to slow to 7% from 25% in the third quarter, led by weakness in energy, financials and industrials.
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The brokerage also expects some carryover impact in the first quarter of FY27, as companies absorb the full effect of the temporary oil shock, including supply disruptions and higher input costs. This may lead to cautious management commentary around demand and margins. However, the overall impact on full-year earnings is expected to be limited, with less than 2% hit to Nifty earnings, as over half the index, including sectors like financials, technology and telecom, remains largely insulated. The impact on small and mid-cap companies could be higher, at around 3% to 4% for the full year, with most of the pressure concentrated in the first half.
Valuations have also turned more reasonable after the recent correction, with the Nifty down 9% year-to-date and trading close to its five-year average at 19.3x one-year forward earnings. A large part of the market is now below long-term averages, and the index’s valuation premium over global peers has narrowed to about 3% from 11% in September 2025. Emkay believes a recovery in the currency could help revive foreign investor flows after the sale of $15.5 billion over the past six months.Despite trimming earnings estimates due to the oil shock, the brokerage has maintained its 29,000 target for the Nifty, rolling it forward to March 2027 with a similar valuation multiple of 20.2x earnings, as it expects the broader earnings recovery story to remain intact.
Also read: Ceasefire calm or chaos? 50 stocks that brokerages expect to rally after Iran truce
Looking ahead, Emkay believes the end of the Iran conflict strengthens the case for a consumption-led recovery in India. It expects multiple triggers through calendar year 2025, including income tax and GST cuts as well as monetary easing. The Reserve Bank’s recent policy stance is also seen aiding transmission of the 125 basis points of rate cuts since February 2025. Improved fiscal flexibility could support continued public spending, particularly in railways and defence.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)