Nifty 50 may rise to 29,500 by CY26-end; earnings may grow by 15% CAGR over FY26-28: Pankaj Pandey of ICICI Securities

Pankaj Pandey, the head of research at ICICI Securities, is positive about the Indian stock market, expecting a healthy double-digit return over the next 12 months and a healthy growth in Nifty earnings over FY26-28. "India offers a perfect trilogy of lower inflation, lower bond yields and improving growth, supporting a positive equity outlook going forward," he says in an interview with Mint. He also finds odds in favour of small-caps delivering healthy double-digit returns in the current calendar year. The only risk for the market, in his view, is geopolitical tensions.

Edited excerpts:

Has your year-end target for Nifty changed?

No, there is no change to our Nifty target. We expect Nifty earnings to grow 15% CAGR over FY26-28E.

Our calendar year 2026 (CY26) end Nifty target is set at 29,500, with the index valued at 21 times FY28E PE.

Our corresponding target for Sensex is pegged at 98,500. We expect markets to deliver healthy double-digit returns over the next 12 months.

India offers a perfect trilogy of lower inflation, lower bond yields and improving growth, supporting a positive equity outlook going forward.

Key drivers at this point are a conducive domestic macroeconomic backdrop (consumption-led GDP growth boost) and easing tariff tensions with US-India and EU-India trade deals on the anvil.

Also, a supportive factor is healthy corporate earnings in Q3FY26, which, at the Nifty 50 level, as on date, adjusted for the labour code charge, stand healthy at 9% YoY.

With sentiment improving, should you start buying mid and small-caps?

Absolutely, at the current juncture, with global sentiment improving in favour of India, we see small- and mid-caps outperforming their peers.

Interestingly, analysing data over the last two decades, it has been observed that the probability of small caps correcting in two consecutive years is low (14%).

Therefore, with the small-cap index down nearly 6% in CY25 and nearly 13% from its all-time high, odds (86% probability) are in favour of small caps resuming the up move and delivering healthy double-digit returns in CY26E.

Nifty Small Cap index trades at nearly 19 times P/E on CY27E versus CY25-27E earnings CAGR of nearly 20%; i.e. attractive (<1 PEG) versus its peers (Nifty 50 and Nifty Mid-Cap).

The budget did not have big measures to boost consumption. Does consumption still remain a compelling theme?

The government has taken various initiatives over the last year, including increasing tax relief under the new tax regime, rationalising the GST rates on daily consumption products/premium products, and reducing interest rates to manage inflation.

These initiatives have started delivering the desired results from Q3FY26 for consumer staple and retail companies, with improvements in volume growth and same-store sales growth compared with the first half of FY26 (H1FY26).

With global uncertainties receding, domestic rural demand back on track, urban expected to gradually recover, and input cost inflation stabilising, we expect the recovery momentum to continue in the quarters ahead.

We maintain our selective stance in the space with preference on food companies in the consumer staples and certain discretionary segments, such as jewellery, premium apparel and hotels, having good earning visibility in the medium term

How do you see the banking sector's outlook going ahead?

India’s banking sector enters FY27 with its strongest balance sheet in decades. Credit growth is expected to remain robust at 11-13%, fuelled by MSMEs and retail demand, while GNPA ratios are at a record low (GNPA at 2.1% as of Sep 2025).

Volatility in margins, amid transmission of the rate cut and challenge in deposit mobilisation, is expected to normalise.

Continued benign credit cost, coupled with a gradual improvement in operational leverage, will enable sustained profitability and resilience in earnings

Has the current rate-reduction cycle reached its end?

The current rate cycle seems to have come to an end with a 125 Repo rate in the calendar year 2025. The status quo decision in the February policy was on expected lines.

The bond market was looking for any further OMO purchases to be announced in the policy, but none were, leading to a 5bps uptick in bond yields.

Do you see any risks that the market is overlooking at this juncture?

At the current juncture, the only major risk in the market is geopolitical tensions that curb global trade flows.

Barring this, most concerns, such as trade-led uncertainty and domestic growth template outlook, seemed to have been adequately addressed.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, 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.