Brokers see double-digit Indian stock returns as Nifty valuations ease

what happened

According to TradingView, Indian equities lost about 3% on the Nifty 50 in Samvat 2082, pressured by the war in West Asia, volatile crude oil prices and persistent outflows from foreign institutional investors. In its Diwali edition note for Samvat 2083, ICICI Direct expects healthy double-digit returns over the next 12 months. It says the listed universe posted over 20% growth in both revenue and net profit in the Q2FY27 earnings season, while mid- and small-caps saw profit growth above 30% year on year.

Kotak Neo notes that Nifty 50 companies reported their strongest annual earnings growth in 11 quarters in Q1FY27. It forecasts Nifty 50 earnings growth of about 18% in FY27 and 13% in FY28. Both brokerages say domestic institutional buying continues to support the market, while the Middle East conflict and foreign outflows remain near-term concerns.

why it matters

The Nifty 50's two-year forward P/E stands at 16.6, below its 10-year average of 18.2. ICICI Direct argues this makes the risk-reward more attractive and that the next leg of the rally will rest on earnings rather than liquidity. Kotak Neo also points to IPOs widening the investment universe.

market impact

Indian equities: lower valuations and higher earnings support interest in the market

• ▲Nifty 50 pressure up — expected earnings growth and lower valuations support the index

instruments