The brokerage cited easing geopolitical situations, resilient macroeconomic cues and earnings revivals behind the decision, confirming that the stretched valuation of the Indian equities has been normalised with the recent correction and allows investors to take a fair entry point with long-term goals.

The brokerage firm pointed out that the domestic institutional investors are the catalyst for equity growth and Initial Public Offerings (IPOs) attract 75% of their allocations. Foreign Institutional Investors (FIIs) will remain complacent about the Indian market. However, it expects a gradual improvement in FII inflow as artificial intelligence (AI)-based trade cools down globally.

Earnings Outlook

Nomura expects corporate earnings to hit low double-digit growth in FY26 with a weak base from the previous year and strong recoveries in commodity-linked sectors such as chemicals, oil and gas, cement, and metals. "Double-digit growth" refers to profits increasing by more than 10 percent.

However, brokerage flagged concerns over FY27 and FY28 revenue growth with slowing investments and widening trade deficits. The trade deficit-the gap between imports and exports-stays high.

Where should one invest?

Nomura advises adopting a bottom-up approach by going for stocks with strong fundamentals rather than chasing popular themes. It urged investors to avoid overvalued sectors such as consumer staples, infrastructure, capital goods, and healthcare services. However, it took a bullish stand on financials, pharmaceuticals, IT services, consumer discretionary goods, real estate, internet companies, cement, telecom, and manufacturing. Nomura is neutral on autos, oil and gas, and metals.

Risks and Upside

According to the brokerage firm, a sharp rise in commodity prices may pose risks, while a strong increase in domestic capital spending pushes markets ahead.

Global Broking Consensus

Nomura's stance is in line with other global brokerages that have turned more optimistic on India. Last month, Morgan Stanley had projected the Sensex could reach 107,000 points by December 2026 in its most bullish scenario and 95,000 points in its base case. Supportive economic conditions and stronger earnings have positioned India for a revival after its underperformance in 2025.

Goldman Sachs also upgraded India to "Overweight", which means it recommends investors allocate more money to Indian stocks compared to other markets. Goldman cited stable earnings, an improving economic backdrop, and strong domestic inflows that offset heavy foreign sales in 2025. It expects the Nifty 50 to reach 29,000 points by end-2026, almost identical to Nomura's forecast.