Mumbai, Dec 11 (LatestNewsX) – The benchmark index is expected to reach 29,000 in 2026, driven by a rebound in discretionary spending during the latter half of the current fiscal year and a slowdown in liquidity injections from the Reserve Bank of India, a report from Emkay Global Financial Services published Thursday.
The firm pointed out that a cycle of uneven capital expenditure and optimism about a potential trade pact with the United States also bolster the outlook. It said that changes to the GST system and structural improvements in affordability should give the consumption side a lift and lay the groundwork for a sustainable growth trajectory over the medium term.
It maintains an overweight stance on discretionary, industrial, healthcare and materials sectors, while rating financials, staples, IT and telecom as underweight. “A softer rate environment and stable policy direction provides a favourable setup for India’s medium‑term growth cycle,” the analysis noted.
The team also highlighted the positive impact of a healthy monsoon on earnings and spending, together with a further boost expected from tax cuts in the 2026 Union Budget. “India’s medium‑term outlook remains remarkably resilient. Despite near‑term volatility, the alignment of softer rates, improving consumption and stable policy direction creates a strong foundation for the country’s multi‑year growth cycle, positioning the Nifty for meaningful upside through 2026,” said Nirav Sheth, CEO‑Institutional Equities at Emkay Global.
The 2026 forecast incorporates the RBI’s anticipated liquidity push, which should lower borrowing costs and strengthen credit flow, especially for retail lenders and NBFCs. While corporate capex is expected to stay moderate, government spending on railways, defence and power remains a visible driver.
The report stressed that large‑caps function as a protective shield in turbulent markets, whereas small and mid‑cap names tend to deliver alpha. “Unlike the Nifty which has more low‑P/E sectors like financials and energy, the SMID universe focuses more toward higher‑growth businesses, which naturally command richer valuations,” said Seshadri Sen, Head of Research and Strategist at Emkay Global.
Domestic mutual‑fund inflows remain solid, even as foreign portfolio investors have been net sellers, with year‑to‑date outflows of ₹271 billion. Meanwhile, the primary market stays active, having issued a total of ₹1,769 billion so far this year.
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