We have refreshed our Top Picks by booking profits in Ujjivan Small Fin Bank, exiting Avenue Supermarts, while adding City Union Bank and CCL Products Ltd.
We increase the Dec’26 Nifty target to 27,360 based on an earnings upgrade of 0.3% each in Nifty EPS for FY27/FY28. We remain constructive on Indian equities, supported by strong macroeconomic fundamentals, sustained government capital expenditure, GST 2.0 reforms and an improving corporate earnings cycle. We expect Nifty earnings to grow at 13% CAGR over FY23–FY28, underpinning healthy medium-term market returns. While geopolitical tensions, crude oil volatility and currency movements may create near-term volatility, we increase our December 2026 Nifty target to 27,360, based on 19.5x December 2027E earnings.
Market volatility in India, as reflected in the VIX, has contracted from recent highs. It is currently at 11, indicating lower volatility in the near term. While extreme volatility has subsided, the market is not entirely out of the woods. Intermittent spikes may persist, especially given ongoing global uncertainties. Hence, we recommend investors maintain good liquidity (10-15%) to use any dips in a phased manner and build a position in high-quality companies (where the earnings visibility is quite high) with an investment horizon of 12-18 months.
Bull Case: We value NIFTY at 20.5x, implying a Dec’26 target of 28,770. Markets are closely tracking the global growth outlook under President Trump, with expectations of easing tariff related uncertainties in 2026. Domestically, a revival in private capex, supported by policy continuity and improving business confidence, along with political stability, fiscal discipline, and rural recovery, is likely to drive growth. With Nifty earnings expected to sustain a 13%+ CAGR over FY23–28, this backdrop could attract fresh capital inflows into Indian markets and support a re-rating of valuations, strengthening the equity outlook.
Bear Case: We value NIFTY at 16.5x, implying a Dec’26 target of 23,155. While valuations may remain above average amid potential policy shifts under the Trump regime, persistent inflation in developed markets and historically elevated interest rates increase downside risks. Uncertainty around currency movements, oil prices, and global trade is likely to weigh on export-driven growth. Additionally, concerns over global growth, exacerbated by tariffs and geopolitical tensions, could compress market multiples in the near term.
Based on the above themes, we recommend the following stocks: Kotak Bank, Bajaj Finance, Bharti Airtel, ICICI Bank, Varun Beverages Ltd, APL Apollo Tubes, HCG Ltd, LG Electronics (I) Ltd, Nestle India Ltd, Eternal Ltd, Chalet Hotels, Minda Corporation Ltd, Dalmia Bharat Ltd, City Union Bank, CCL Products
