9 months ago
India Equities Upgraded to Overweight on Strong Earnings Outlook
Imagine investors are deciding where to put their money to help companies grow.
They've looked at India's stock market and decided it's a really good place to invest right now, so they're calling it 'Overweight'.
This means they think it will do better than many other similar markets.
They believe the companies in India will make more money in the next couple of years, and their current prices are attractive.
They especially like companies that sell things to lots of people, like food and cars, and companies that help others, like banks.
They also see potential in areas like technology and defense.
While things look good, they are also aware that sometimes unexpected problems can pop up, like if companies don't make as much money as hoped or if global events cause trouble.
India equities have been upgraded to 'Overweight' with a NIFTY target of 29000 by end-2026.
The upgrade is driven by better relative valuations and stronger earnings growth expectations compared to other emerging markets.
Favored sectors include Financials, Consumer (Staples, Durables, Autos), Defense, TMT, and Oil Marketing Companies.
Q2 earnings exceeded subdued expectations, and the outlook for the second half of FY26 is positive.
Potential risks include earnings shortfalls, external headwinds, and the impact of AI on the economy.
- Who
- Bandhan Asset Management Co. (Manish Gunwani, Head of Equities)
- What
- Upgraded India equities to 'Overweight' with a 2026 NIFTY target of 29000, citing better valuations and earnings growth compared to other emerging markets.
- Where
- India, within emerging and Asian market allocations.
- When
- The upgrade is effective now, with targets set for end-2026, and reflects Q2 earnings exceeding expectations and a positive outlook for the second half of FY26.
- Why
- Improved relative valuations, better-than-expected Q2 earnings exceeding subdued expectations, positive macroeconomics (stable CAD, benign inflation), fiscal and monetary stimuli, and a potential weakening US dollar.
Positive Outlook for Indian Equities
Potential Risks and Concerns
Market Performance and Valuation
Positive Outlook for Indian Equities
Indian equities are raised to 'Overweight' with a target of NIFTY reaching 29000 by end-2026, implying 14% upside. This is driven by an expected 14% trend earnings growth in 2026/27 and moderated valuations after a one-year time correction.
Potential Risks and Concerns
While valuations have moderated, concerns remain about potential earnings shortfalls and external headwinds. The impact of AI on jobs and services exports is also noted as a potential risk.
Sectoral Preferences
Positive Outlook for Indian Equities
Favoritism towards Consumer (staples, durables, autos), Financials, Defense, TMT, and OMCs, with themes of mass-consumption revival, self-sufficiency, and new economy growth.
Potential Risks and Concerns
Consumer retail and services sectors (excluding jewelry) are moved to neutral due to heightened competitive intensity. Acknowledgment of potential risks associated with AI's impact on the economy.
Key facts
- India Equities Rating
- Overweight
- NIFTY Target (End-2026)
- 29000
- Implied Upside
- 14%
- Expected Earnings Growth (2026/27)
- 14%
- Favored Sectors
- Financials, Consumer (Staples, Durables, Autos), Defense, TMT, OMCs
- Key Themes
- Mass-consumption revival, Self-sufficiency, New Economy, High Growth pockets
- Downgraded Sector
- Consumer retail and services (excluding Jewelry)
Timeline
India's manufacturing soared to a 17-year high in August.
Strong sales then boosted company profit forecasts.
Quotes
Manish Gunwani
head of equities at Bandhan Asset Management Co.
“Earnings expectations for Q2 were quite muted. In this context, the actual numbers have done slightly better than the subdued expectations.”
livemint.com
“For instance, expectations for the IT sector were low, but earnings exceeded estimates. Similarly, in the banking sector, results were better than expected. However, in capital goods, there was some disappointment relative to expectations.”
livemint.com
Sources
Strong Q2 sales drive earnings upgrades
Oversupply helped cap valuations in secondary market: Franklin Templeton VP Shyamsunder
Share Market Today Live Updates 10 November 2025: Sensex, Nifty set for cautious start; inflation data, FII trend key
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Stocks market today: Gift Nifty up 68 pts; key levels for Nifty, Sensex & Nifty Bank
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