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Informist, Tuesday, Oct. 6, 2026

 

MUMBAI – Taking the global rise in government bond yields into consideration, brokerage Nomura Financial Advisory and Securities has trimmed its target for the Nifty 50 in March to 24000 points while reducing its one-year forward multiple to 17 from 18 earlier. However, the broking firm does not see the structural headwinds from geopolitical and technological changes having a long-term impact on the stock market's growth and remains positive on the information technology and financial sectors, it said in a strategy report.

 

"We continue to recommend a bottom-up approach from a medium- to long-term perspective," the brokerage said. "Against the backdrop of hardening in yields, our stance prefers stocks that present value, and we recommend being selective in growth." It suggested investors remain conscious of valuations rather than simply chasing narratives.

 

The rise in bond yields in developed markets was led by strong growth and demand for credit, rather than expectations of long-term inflationary pressures. The brokerage also hinted that there is no sign of any debt stress. This has turned out to be an indicator of an adverse situation for foreign capital flows into India and emerging markets.

 

Nomura expects some concerns over an earnings cut in case crude oil and commodity prices remain high in the near term. India's relative earnings growth expectations have come down, it said. "...the difference in the spread between earnings yield and bond yield for the Nifty (50) and the SPX (S&P 500 index) is indicative of relative long-term earnings growth expectation differential between the Nifty and the SPX," it said. "The move over the past five years suggests that it has moved against India." It sees mid-cap and small-cap indices being more resilient.

 

The two phases of correction in the domestic stock market during Feb-Mar and Aug-Sept indicate deeper structural concerns of investors, Nomura said. "The correction reflects growing apprehension around long-term growth, rooted in geopolitical realignment and technological disruption — and their potential adverse implications for India," as per the report.

 

In the June quarter, the impact of higher crude oil prices and the West Asia conflict was limited as the impact was largely carried by the oil and gas sector, the broking firm underscored. It anticipates a moderation in earnings growth for the remaining quarters of the financial year 2026-27 (Apr-Mar). A large impact of higher crude oil and commodity prices, along with an adverse base, is expected to be seen in the upcoming quarter, Nomura said.

 

Consumer stocks are likely to see margin pressure as companies consume higher-cost inventory and price hikes stay materially below the input cost inflation. When it comes to capital goods stocks, the brokerage sees margins contracting year-on-year as higher zinc, copper, aluminium, and pig iron prices weigh on gross margins. The partial offsetting of price hikes, cost control measures, and operating leverage are also likely to drive margin contraction of capital goods companies. However, for information technology services, the rupee depreciation is expected to support margins, where much of the benefit is likely to be passed on to customers in renewals or reinvested into artificial intelligence initiatives.

 

For FY28, the consensus estimate factors in "high-teens" earnings growth, the brokerage said. "We think this assumes significant de-escalation of macro headwinds and easing of geopolitical tensions, lower crude prices and not a disruptive move in interest rates," according to the strategy report. A pickup in broad-based investment cycle, manufacturing, narrowing of current account deficit, and strong consumer sentiment are needed for the earnings growth to largely sustain ahead of nominal GDP growth. Nomura views a mid-single-digit earnings cut for FY28 as a possibility.  End

 

Reported by Arundathi A R

Edited by Rajeev Pai

 

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