Global financial services firm Nomura forecasts that India's benchmark Nifty index could surge past the 24,000 mark by March 2027. This bullish projection is underpinned by several key factors, including an expected improvement in foreign investor sentiment towards Indian equities, driving portfolio inflows in the near term.
A significant catalyst for this anticipated rally is the potential for a reduction in long-term capital gains (LTCG) tax for foreign institutional investors (FIIs). Coupled with a fall in global yields and expectations that the rupee will remain stable due to central bank intervention, these elements are poised to bolster the domestic market, which is already experiencing robust earnings growth.
Driving Factors for Nifty's Ascent
Nomura's outlook is further supported by current low starting expectations, with valuations across most sectors remaining below post-pandemic averages. The recent correction in artificial intelligence (AI) stocks has also contributed to a more attractive entry point for investors.
The demand environment across various segments has shown resilience, translating into strong revenue growth. While some compression in EBITDA margins has been observed due to higher commodity prices, the overall cyclical recovery, stimulated by fiscal and monetary measures in 2025, has outpaced Street expectations.
Strong Earnings Performance
The second-quarter earnings season has commenced positively, following a strong Q1. Nomura reports that with roughly half of its coverage universe having reported, normalized Profit After Tax (PAT) grew an impressive 34 percent year-on-year. This figure represents an 18 percent beat against consensus estimates. Even excluding the oil & gas sector, normalized PAT expanded by 29 percent year-on-year, still surpassing consensus expectations by 5 percent.
However, Nomura notes that consensus expectations suggest a slowdown in earnings growth for the second half of fiscal year 2027 (2HFY27E). This is attributed to a high base effect and headwinds from elevated interest rates and commodity prices. For Nomura's universe, normalized year-on-year PAT growth for 2HFY27F is projected at 3 percent, a significant drop from the 34 percent seen in Q2 and 17 percent in H1FY27.
Foreign Flows and Market Concerns
Regarding foreign capital flows, FIIs experienced heavy selling in the fortnight ending October 15, with outflows of $5 billion—the most substantial fortnightly outflow in 12 periods. This brought net selling since September 15 to $8.8 billion. Encouragingly, Nomura indicates that the intensity of FII selling has eased over the subsequent 15 days.
While oil prices remain a concern, they have corrected by 7 percent from their recent peak. From a longer-term perspective, market concerns persist around geopolitical and technological uncertainties, which could temper long-term growth expectations for Indian equities.