Nomura is exhibiting a positive outlook on Indian equities, highlighting the nation's strong position amidst shifting global market dynamics. Despite projecting a slight moderation in India's GDP growth for FY26, the brokerage firm has increased its Nifty target for March 2026, signaling confidence in the country's macroeconomic resilience and potential for further market gains.
Nomura's optimism stems from several key factors. India's limited trade exposure shields it from the immediate shocks of global trade tensions. The country is also seen as a primary beneficiary of the "China+1" strategy, as companies diversify their supply chains to mitigate risks associated with over-reliance on a single market. This dynamic is expected to drive increased foreign investment and boost India's manufacturing and export sectors. As the exceptional economic performance of the United States diminishes, India's strong fundamentals make it stand out within the emerging markets landscape.
While Nomura is structurally positive on India, it also maintains a tactical overweight position on China. This suggests a nuanced approach, recognizing the potential for short-term gains in the Chinese market while maintaining a long-term focus on India's growth story. In its broader Asia market strategy, Nomura is neutral on South Korea and tactically underweight on Taiwan, using the latter to fund its overweight positions in India and China. This reallocation of assets reflects Nomura's conviction in the growth prospects of the Indian and Chinese markets relative to others in the region.
Nomura's economists expect India's real GDP growth to moderate to 6.2% in FY26, a slight decrease from the 6.5% projected for FY25. This projection considers a divergence between GST collection growth and other high-frequency indicators, such as auto sales and bank credit growth. Despite this moderation, Nomura has raised its Nifty target for March 2026 to 26,140 points, up from the previous target of 24,970. This upward revision reflects improving macroeconomic conditions and the relative resilience of Indian equities.
The brokerage firm believes that positive domestic factors, including falling bond yields and consistent domestic flows into the equity market, are supporting market valuations. This confidence is further bolstered by the Indian equity market's demonstrated resilience in the face of corporate earnings estimate cuts and global uncertainties.
Nomura favors domestic-focused sectors over exporters, given the prevailing global uncertainties and the likelihood of delayed investment cycles. Sectors like financials, consumer staples, discretionary spending, oil and gas, telecom, power, internet, real estate, and select domestic healthcare companies are favored. The brokerage is more cautious on export-oriented sectors and capital expenditure-related themes, including IT services, industrials, cement, and metals.
While Nomura is optimistic about the Indian equity market, it acknowledges potential headwinds. Corporate earnings growth is expected to be lower than GDP growth, and there are concerns about a weak investment cycle, fiscal consolidation by the government, reduced household financial savings, and soft export demand. However, these headwinds could be partially offset by lower oil prices, inflation, and interest rates.
Other brokerage firms share a similar sentiment of cautious optimism. BofA Securities, while expressing caution about near-term equity valuations, maintains a constructive long-term view on India. They highlighted nine structural themes including infrastructure development, productivity gains, digitization, and financialization.
