PL Capital sees a constructive outlook for Indian stock markets, projecting the Nifty target at 27,958 in the next 1 year, driven by improving earnings visibility, easing global headwinds and domestic growth resilience.
According to the brokerage, a combination of trade breakthroughs, a steady macro environment and a strong earnings cycle is setting the stage for further upside in the benchmark index.
“Trade breakthroughs and a sustained earnings recovery underpin our constructive outlook on Indian equities. With earnings expected to compound at a healthy pace, valuation comfort and sectoral breadth improve, supporting our base-case Nifty target of 27,958 over the medium term,” PL Capital said in a recent report.
The brokerage added that while global volatility remains an overhang, India continues to stand out due to relative macro stability, controlled inflation and a favorable growth-inflation mix. It believes these factors collectively provide a strong foundation for equities, even as global markets grapple with policy uncertainty.
Furthermore, PL Capital noted that India’s earnings cycle remains firmly in an uptrend, with a 16% compounded annual growth rate (CAGR) expected over the coming years. This earnings momentum, supported by domestic demand, government-led capital expenditure and balance-sheet repair across sectors, underpins the brokerage’s bullish stance on equities.
Bull and bear scenarios
As per the brokerage, on valuations, the Nifty currently trades at 19.1x one-year forward earnings, broadly aligned with its 15-year average. The base case assumes the index trading at 18.3x—reflecting a 5% discount to long-period averages—on December 2027 EPS of 1,525, translating into a 12-month target of 27,958. In a bullish scenario, a 20x multiple implies upside towards 30,497, while a conservative bear case suggests 26,486.
Next growth cycle
As per the brokerage, a defining catalyst for the next growth cycle has been India’s accelerated progress on trade diplomacy. The recently concluded India–EU Free Trade Agreement marks a historic breakthrough as The European Union, accounts for nearly 19% of India’s exports. It represents a combined market of approximately $24 trillion, which will now offer India preferential access across 97% of tariff lines, covering 99.5% of trade value.
It also added that parallelly, India’s interim trade framework with the United States has removed a significant overhang for exporters. Following the imposition of reciprocal and punitive tariffs in 2025, the new understanding withdraws punitive duties and reduces reciprocal tariffs from 25% to 18% upon conclusion of the broader agreement.
Amnish Aggarwal, Director Research, Institutional Equities, PL Capital said, “India is transitioning from a cyclical recovery phase to a structurally stronger growth trajectory. What differentiates this cycle is the depth of policy execution, rising private sector participation and the scale of opportunity emerging across manufacturing, digital infrastructure and domestic consumption. Markets may have paused, but the underlying economic engine continues to gain strength. As capital formation accelerates and productivity enhancements play out, we believe Indian equities are entering the early stages of a multi-year compounding cycle.”
What should be your strategy?
From an investment strategy perspective, PL Capital advised investors to stay aligned with earnings visibility rather than short-term market noise. It emphasized stock selection over index timing, recommending a focus on companies with strong balance sheets, pricing power and sustainable cash flows.
PL Capital said the strategy remains constructive on banks, diversified financials, healthcare, consumer, automobiles and capital goods/defense, with a relatively cautious stance on IT services and commodities. These sectors, according to the brokerage, offer a favorable risk-reward profile in the current phase of the market cycle.
“We believe investors should focus on stock-specific opportunities rather than attempt to time the market. Companies with strong balance sheets, earnings visibility and structural growth drivers are better positioned to outperform as the Nifty moves towards our target of 27,958,” PL Capital said.
The brokerage added that while valuations in certain pockets appear full, the broader market still offers selective opportunities, especially where earnings growth justifies pricing. It reiterated that disciplined asset allocation and a medium-term investment horizon remain critical for navigating market volatility.
PL Capital also noted that volatility should be viewed as an opportunity rather than a risk. It believes intermittent market corrections could offer investors attractive entry points into fundamentally strong stocks aligned with the broader earnings cycle.
The brokerage maintained that India’s domestic growth drivers — including infrastructure spending, manufacturing incentives and consumption recovery — continue to offset external risks, making the medium-term equity outlook favourable.
Top Stock Picks by the brokerage
Large-caps: Adani Ports, Britannia, HAL, ICICI Bank, L&T, M&M, Shriram Finance, Tata Steel, Titan
Mid- and Small-caps: HealthCare Global Enterprises, Ingersoll Rand, IPCA Labs, KEI Industries, LG Electronics.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
