Synopsis
Indian equities enter Samvat 2083 after a correction that has made valuations more attractive, but a sustained rally will depend on several triggers. Falling crude oil prices, easing inflation, an earnings recovery, FII buying, an India-US trade deal and continued domestic liquidity could shape the market's trajectory over the next year.
Indian stock market entered Samvat 2083 with valuations reset, earnings showing resilience and foreign investors still positioned heavily against the market. Analysts say the next leg of the trade will depend on whether crude oil retreats, inflation cools, and corporate earnings broaden beyond a handful of sectors.
The Nifty and Sensex fell 3-4% during Samvat 2082, while broader indices also corrected. Motilal Oswal Financial Services estimates that the Nifty is trading at 17.5 times forward earnings, around 16% below its long-term average. Nuvama Wealth Management said the index’s trailing price-to-earnings multiple had fallen to around 19 times, among the lowest levels since 2022.
“Historically, the 19–20x P/E zone has attracted buying interest, offering favourable risk-reward for long-term investors,” Nuvama said.
Motilal Oswal expects Nifty earnings per share to grow 16% in fiscal 2027 and 14% in fiscal 2028, compared with 5% growth in fiscal 2026. That earnings recovery, however, will need support from a combination of global and domestic triggers.
1) A sustained fall in crude oil prices
Crude oil remains the most immediate macro risk for Indian markets. India imports more than 85% of its crude requirements, making oil prices critical for inflation, the current account, the rupee and corporate margins.
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Axis Securities said Brent crude had surged to around $114 a barrel amid West Asia tensions. A sustained decline towards $85-90 a barrel could ease input costs, support the rupee and improve market sentiment.
Oil marketing companies, paints, aviation, tyres, chemicals and consumption-oriented businesses would be among the potential beneficiaries, according to Axis Securities. Analysts also warned that every $10-a-barrel increase in crude oil prices could add $12-15 billion to India’s annual import bill, widening the trade deficit and increasing pressure on the rupee.
2) De-escalation in West Asia
A diplomatic resolution to the Iran-related conflict could reduce the risk premium embedded in crude prices and global markets.
Nuvama identified an Iran deal as one of the five potential catalysts for a market resurgence. Lower geopolitical risk could improve India’s inflation, currency and fiscal outlook, while reducing pressure on sectors such as aviation, chemicals, paints, logistics and manufacturing.
The opposite scenario remains a key risk. Prolonged geopolitical tensions could keep crude elevated and delay any sustained market recovery.
3) A peak in interest rates
The Reserve Bank of India raised the repo rate by 25 basis points to 5.50% in October and shifted its policy stance to calibrated tightening, according to SBICAP Securities.
Axis Securities said there was limited scope for near-term easing, with a pause or another increase possible if inflationary pressures broaden. Evidence of moderating inflation, alongside stable crude prices, could improve the outlook for NBFCs, housing finance, autos, real estate and consumer durables.
Also read:Bumper returns are the call! How can investors make money in Samvat 2083 after a year of stagnation?
Higher borrowing costs, on the other hand, could weigh on interest-sensitive sectors and companies with high leverage.
4) The return of FIIs
Foreign portfolio investor selling was one of the biggest overhangs on Indian equities during Samvat 2082. Motilal Oswal put FII outflows at about $28 billion between January and September 2026, while SBICAP Securities estimated cumulative secondary-market foreign outflows of more than ₹3.6 trillion between October 2025 and September 2026.
Nuvama said FII positioning in index futures had reached historically extreme short levels. Nearly 100,000 short contracts had already been covered from peak levels, suggesting that any positive domestic or global trigger could accelerate short covering.
FIIs are now hoping that the government will give them some relief on the LTCG front in the Budget if not before that.
5) A broad-based earnings recovery
The durability of any market revival will ultimately depend on earnings delivery. Axis Securities said 16 Nifty 50 companies had reported results with year-on-year revenue growth of 15%, EBITDA growth of 15% and profit growth of 19%. It said investors would need to track demand trends, pricing power, input-cost pass-through, wage and finance costs, order-book conversion and capital-expenditure plans.
Motilal Oswal expects the return of double-digit earnings growth in fiscal 2027. Its estimates point to 16% Nifty EPS growth in fiscal 2027 and 14% in fiscal 2028.
SBI Securities said average profit growth among Nifty 500 companies had been stronger than that of Nifty 50 companies, while small-cap earnings growth had been supported by margin expansion, operating leverage and the manufacturing capex cycle.
The key question for Samvat 2083 will be whether earnings growth broadens across sectors and companies, rather than remaining concentrated in select pockets of the market.
6) A favourable India-US trade agreement
Axis Securities identified the conclusion of an India-US trade agreement as another potential market catalyst.
A final agreement that clarifies tariff commitments and improves market access could support textiles, gems and jewellery, engineering goods and other export-oriented industries.
Motilal Oswal also listed trade agreements among the key monitorables for Samvat 2083. It said agreements with the UK, Oman and New Zealand were already in place, while negotiations with the European Union and the US were under way.
7) The Union Budget and public capex
The Union Budget in early 2027 will be a major domestic event for Indian equities. Axis Securities said continued public spending on infrastructure, defence, railways and power, alongside fiscal discipline, would support investment-led growth. Measures that stimulate consumption or attract private investment could further improve sentiment towards capital goods and infrastructure stocks.
The government’s budgeted capital expenditure of ₹12.2 lakh crore is also among the factors supporting the domestic growth outlook, according to Motilal Oswal.
Brokerages remain positive on manufacturing, defence, infrastructure, power equipment, semiconductors, data centres and renewables as longer-term beneficiaries of India’s investment cycle.
8) Inflation normalisation and resilient domestic liquidity
CPI inflation rose to 5.54% in September, while the RBI’s fiscal 2027 inflation forecast stood at 5.2%, according to Axis Securities. A sustained decline in energy and food prices could support household purchasing power and give the central bank greater policy flexibility.
Domestic liquidity remains a critical buffer. Axis Securities said monthly SIP contributions had reached a record ₹32,490 crore in September 2026. Continued domestic investment, combined with a moderation in FPI outflows, could provide meaningful support to equities.
However, prolonged market weakness could eventually affect retail risk appetite, the brokerage warned.
Where brokerages see opportunities
Motilal Oswal is positive on BFSI and capital markets, manufacturing, global outsourcing and exports, and consumption and digital businesses. Axis Securities favours private banks, hotels, autos, quick commerce, building materials, metals, technology and diagnostics.
Nuvama identified IT, PSU banks and pharma as sectors to watch. It said Indian IT could benefit from a global rotation away from richly valued AI-focused markets, while PSU banks could see further earnings growth from healthy credit growth, improved asset quality and potential margin recovery.
The stock recommendations across brokerages also reflect the same themes, with names such as ICICI Bank, Kotak Mahindra Bank, Bharat Electronics, Indian Hotels, Tata Steel, Larsen & Toubro, Ambuja Cement, Maruti Suzuki, Blue Star, CESC and Delhivery appearing in various Diwali portfolios.
The investment message, however, is not one of indiscriminate buying. Axis Securities said the appropriate response was “neither indiscriminate buying after a correction nor a wholesale retreat from equities,” recommending a staggered approach, a 12-month horizon and discipline on valuations.
Samvat 2083, therefore, may not deliver a straight-line recovery. Its outcome will depend on whether lower valuations are matched by lower oil prices, stable macroeconomic conditions, returning foreign capital and sustained earnings growth.
(Disclaimer: This article has been written by Nikhil Agarwal, who is not a SEBI-registered Research Analyst or an Investment Adviser. Nikhil Agarwal and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimershere
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