Brokerage firm Monarch Networth Capital expects the Nifty to rise to 27,000-28,000 during calendar year 2026, implying meaningful upside from current levels, backed by a recovery in corporate earnings, continued capital expenditure and a supportive interest rate environment.
The brokerage estimates Nifty earnings per share (EPS) at 1,251 for FY27 and 1,443 for FY28, and believes India's structural growth story remains intact despite recent market volatility.
"The correction witnessed in large-cap sectors due to sustained FII selling appears excessive relative to underlying fundamentals," said Gaurav Bhandari, CEO of Monarch Networth Capital.
According to the brokerage, the next leg of market gains is likely to be led by banking stocks, telecom companies and a gradual recovery in largecap IT stocks, while select midcap and smallcap companies offer attractive opportunities following an 18-month period of earnings adjustment and valuation correction.
Banking, telecom and IT to lead recovery
Monarch said India's long-term growth outlook continues to be supported by reforms such as GST, RERA, the production-linked incentive (PLI) scheme, corporate tax reforms and infrastructure investments.
The brokerage also highlighted the strengthening of corporate balance sheets and a sharp rise in private sector capital expenditure.
"India Inc's resilience is evident in corporate capex growth of the top 500 listed non-financial companies, which has nearly doubled to around Rs 10 lakh crore versus pre-pandemic levels," Bhandari said.
The brokerage expects the recovery in the benchmark index to be driven primarily by financials, telecom and technology companies, sectors that have underperformed amid persistent foreign institutional investor selling.
Bullish on midcaps and smallcaps
Monarch is more constructive on select smallcap and midcap stocks, arguing that earnings growth, time correction and valuation normalisation have improved the risk-reward profile in the segment.
The brokerage expects the Nifty Midcap 150 index to reach around 25,595 and the Nifty Smallcap 250 index to climb to approximately 19,640.
It also believes the ongoing rate-cut cycle could emerge as a significant catalyst for smaller companies.
"Historical trends indicate that easing monetary policy has generally supported strong post-cycle returns across midcap and smallcap indices. Lower interest rates support economic activity, improve revenue growth prospects, enhance operating leverage and reduce financing costs," Bhandari said.
Among its preferred ideas, Monarch highlighted three stocks.
SBI: The brokerage believes SBI offers an attractive risk-reward proposition due to strong asset quality, healthy loan growth and sustainable profitability. It also sees scope for value unlocking through the lender's subsidiaries. Monarch noted that despite delivering profitability metrics comparable to leading private sector banks, SBI continues to trade at a valuation discount.
HFCL: The brokerage is positive on HFCL because of its earnings turnaround, strong order book and growing export business. It also expects the company to benefit from long-term themes such as 5G rollout, data centre expansion, defence manufacturing and rising fibre demand.
Hindustan Copper: Monarch sees long-term potential in the state-run miner, citing rising domestic copper demand, expansion plans under its Vision 2030 strategy and its position as India's only vertically integrated copper producer.
The brokerage's optimistic outlook comes as investors assess the impact of lower interest rates, improving domestic demand and a recovery in corporate earnings after a period of market consolidation.
