Nifty 50 May Touch 29,500 by CY26-End; Small-Caps Likely to Outperform, Says ICICI Securities’ Pankaj Pandey
Pankaj Pandey, Head of Research at ICICI Securities, remains optimistic about the Indian equity markets and expects the benchmark Nifty 50 to scale 29,500 by the end of calendar year 2026 (CY26), supported by strong earnings growth and favourable macroeconomic conditions.
According to Pandey, Nifty earnings are projected to grow at a 15% compound annual growth rate (CAGR) over FY26–FY28, while equities could deliver healthy double-digit returns over the next 12 months, barring any major global disruptions.
Strong Macro Tailwinds Support Equity Outlook
Pandey highlighted that India is currently benefiting from a rare combination of lower inflation, declining bond yields, and improving economic growth, which together create a supportive environment for equities.
Key domestic drivers include consumption-led GDP growth and easing global trade concerns, with potential US-India and EU-India trade agreements acting as additional positives. Corporate earnings momentum also remains encouraging, with Q3FY26 Nifty earnings rising 9% year-on-year, adjusted for labour code-related charges.
At current projections, the CY26-end Nifty target implies a valuation of 21x FY28 estimated earnings. ICICI Securities has also pegged its Sensex target at 98,500 for the same period.
Small- and Mid-Caps Seen Outperforming
With global sentiment gradually improving, Pandey believes small- and mid-cap stocks are well-positioned to outperform large caps in the current calendar year.
Historical data over the past two decades shows that the probability of small-cap indices correcting for two consecutive years is relatively low. After declining nearly 6% in CY25 and remaining about 13% below their all-time highs, small caps now present a favourable risk-reward setup.
Valuations also appear attractive, with the Nifty Small Cap index trading at around 19x CY27 earnings, against an expected earnings CAGR of nearly 20%, translating into a sub-1 PEG ratio.
Consumption Recovery Gaining Traction
Despite the Union Budget lacking aggressive consumption-boosting measures, Pandey noted that recent government initiatives—such as tax relief under the new tax regime, GST rationalisation, and interest rate cuts—are beginning to show results.
Consumer staples and retail companies have reported improving volume growth and better same-store sales from Q3FY26, supported by stabilising input costs, recovering rural demand, and a gradual pickup in urban consumption.
Within the space, ICICI Securities prefers food-focused consumer staples, along with select discretionary segments like jewellery, premium apparel, and hotels, citing strong medium-term earnings visibility.
Banking Sector Enters FY27 on Strong Footing
Pandey also remains constructive on the banking sector, noting that Indian banks are entering FY27 with their strongest balance sheets in decades. Credit growth is expected to remain in the 11–13% range, driven by retail and MSME demand.
Gross non-performing asset (GNPA) ratios are at multi-year lows, while margin pressures linked to rate transmission and deposit mobilisation are expected to stabilise over time, supporting sustained profitability.
Key Risk: Geopolitical Tensions
While the overall outlook remains positive, Pandey cautioned that geopolitical tensions impacting global trade flows remain the primary risk to markets. Other concerns, including trade uncertainty and domestic growth worries, appear largely priced in, he added.
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