Nifty 50 jumps 7% in H1FY26: Can the index hit a record high by 2025-end?

Despite a plethora of headwinds— from Trump's tariffs to heavy foreign capital outflow— the Indian stock market benchmark, Nifty 50, is set to conclude the first half of the financial year 2025-26 (H1FY26) with decent gains.

Till September 24, the index is up 6.5 per cent in the financial year, with 38 stocks in the green, as per Capitalmarket data.

Shares of Eternal are topping the chart, clocking a whopping gain of 67 per cent in FY26 so far. Auto stocks Hero MotoCorp and Maruti Suzuki are up over 40 per cent each. In fact, as many as 22 stocks have jumped over 10 per cent in the current financial year.

On the other hand, shares of TCS are at the bottom, falling nearly 16 per cent, followed by HCL Tech, Trent, Wipro, Kotak Mahindra Bank, Sun Pharma, and Infosys, falling between 5-10 per cent.

What drove the Indian stock market in H1FY26?

Despite concerns over weak earnings, stretched valuations, and massive FIIs (foreign institutional investors) selling amid US tariff risks, the Indian stock market not only avoided a crash but is also up almost 7 per cent in the current financial year so far.

The biggest factor behind the market's resilience is sustained buying by DIIs (domestic institutional investors) amid favourable growth-inflation dynamics due to healthy monsoon, government policies and RBI rate cuts.

So far in FY26, FIIs have offloaded nearly ₹90,000 crore worth of Indian equities in the cash market, while DIIs have stepped up, purchasing over ₹3.5 lakh crore of domestic stocks.

The massive buying by domestic investors followed the healthy macro outlook amid above-normal monsoon, government reforms, such as income tax relief and the recently announced GST rate cuts, and the RBI's monetary easing. Softer crude oil prices have also acted as a key positive factor for the market.

"The government’s decision to exempt income tax up to ₹12 lakh has provided meaningful relief to the middle class, boosting sentiment. Above-normal monsoons helped keep food prices under control, translating into lower inflation, while crude prices have stayed within manageable levels—keeping the economy agile and the deficit in check. Additionally, GST rate cuts—from 28 per cent and 12 per cent down to 18 per cent and 5 per cent—have spurred pent-up demand, particularly in autos and white goods," said Shrikant Chouhan, the head of equity research at Kotak Securities.

Nandish Shah, Assistant Vice President – Fundamental Research and Advisory, Wealth Management at Motilal Oswal Financial Services, has similar views.

"In H1FY26, the Nifty’s nearly 7 per cent gain was driven by easing earnings cut intensity, supportive policy measures, and a resilient macro backdrop. While the last four quarters had seen earnings downgrades, the pace of cuts moderated sharply in 1QFY26, with mid-caps even witnessing positive revisions," said Shah.

"Policymakers adopted a 'whatever-it-takes' stance—RBI cut the repo rate by 100 basis points to 5.5 per cent and CRR is being reduced to 3 per cent, while fiscal measures such as GST rate cuts and lower personal taxes boosted consumption prospects," said Shah.

Can the Nifty 50 hit a record high by the end of 2025?

There is much uncertainty in the market, but hopes of earnings recovery and with valuations coming to reasonable levels, the domestic market is expected to see a healthy second half of the financial year.

Pankaj Pandey, the head of research at ICICI Securities, believes the Nifty 50 could hit a high and hover around 26,500-27,000 by the end of 2025.

"Despite the H-1B visa fee hike issue, we are still maintaining our Nifty target of 26,500-27,000 by the end of 2025. In our view, the impact on tier-1 IT majors will be incremental—around 1–2 per cent on their profitability," said Pandey.

Pandey said he would revisit the target only if the RBI cuts rates, as that could delay margin recovery for the BFSI sector. RBI rate cuts may weigh on banks' profitability, which may drag the benchmark index.

"You can’t expect the index to rise meaningfully without support from BFSI," said Pandey.

The Nifty 50 would have comfortably surpassed its previous peak if not for the weak currency, muted earnings, and persistent concerns about tariffs.

Chouhan pointed out that earnings are gradually improving, and with the low base effect, growth prospects should improve.

"From December onwards, markets are likely to start discounting one-year forward earnings, drawing smart investors back and potentially pushing indices to fresh highs. That said, currency weakness remains a key risk, possibly weighing on FII flows," Chouhan said.

Shah underscored that the Nifty’s 12-month forward P/E of nearly 20.6 times is in line with long-period averages, leaving room for re-rating as earnings stabilise.

"With PAT growth of nearly 10 per cent expected in FY26, reforms such as GST 2.0 and a pickup in rural demand, market sentiment remains constructive. A stronger earnings cycle, reasonable valuations, and a base of underperformance (the Nifty is down 8 per cent year-on-year versus gains of 16 per cent and 15 per cent for the MSCI EM and S&P 500 over the past year) set the stage for a potential market up-move and valuation expansion in Indian equities,” said Shah.

Earnings remain the key

Experts say that the trajectory of the Indian stock market will depend on earnings recovery. The Q2 numbers could show signs of green shoots, while Indian corporates' top and bottom lines may see healthy improvement from Q3 onwards.

The key risk is the trade tussle triggered by US President Donald Trump's tariff policies and his recently announced H-1B visa fee hike.

Nitant Darekar, a research analyst at Bonanza, expects modest earnings recovery and sustained consumer demand to gradually broaden market participation. He said the trajectory will depend on moving beyond the current narrow market leadership to more widespread sectoral strength.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.