Where is Nifty 50 headed by March 2026? InCred Equities flags further downside

The Nifty 50 has dropped 14% from its record high of 26,277.35 in September 2024, as weak earnings, persistent foreign outflows, and global trade concerns weigh on the market, prompting InCred Equities to lower its target for the benchmark index to 22,850 by March 2026, signaling a modest upside of just over one percent from current levels.

In its latest strategy note, InCred raised the probability of a bear-case scenario to 45%, up from 40%, as corporate earnings downgrades accelerate and foreign institutional investors (FIIs) continue to pull out of Indian markets. Consensus earnings-per-share (EPS) estimates for FY25-FY26 have been cut by 2-3%, with sectors such as cement, chemicals, and metals bearing the brunt of the reductions. Only consumer discretionary stocks have seen modest upgrades.

The earnings downgrade cycle could bottom out by September 2025, InCred analysts said, cautioning that continued FII outflows remain a key drag on market sentiment.

Despite the gloomy outlook, some sectors showed resilience in the December 2024 quarter. Nifty 50 companies reported a 7.5% year-on-year increase in profit after tax, led by gains in retail, telecom, healthcare, oil and gas, and capital goods. However, weaker performances in cement and metals weighed on broader index growth.

Amid ongoing volatility, InCred said it is shifting its focus toward large-cap and value stocks. The brokerage has added Adani Ports and Special Economic Zone, Bajaj Auto, Marico, and Shriram Finance to its high-conviction list, citing strong fundamentals and attractive valuations. Ethos, a mid-cap player, was also added for its focus on super-premium watches, which is expected to boost margins and profitability.

With valuations correcting sharply since September 2024, the Nifty 50’s forward price-to-earnings (P/E) ratio has fallen below its 10-year average of 20x, which could help contain further downside risks. InCred also noted that real earnings yields have turned positive for the first time since the Covid-19 pandemic, offering potential support for large-cap stocks, and thereby limiting the downside.While government measures like Rs 1 trillion in personal income-tax cuts and potential rate reductions from the Reserve Bank of India (RBI) could help fuel a consumption-led recovery in FY26, InCred cautioned that global economic uncertainty, currency volatility, and a potentially weak monsoon season remain key risks in the months ahead.Value-driven strategies are likely to outperform growth-focused ones in the current environment, InCred noted, as market participants weigh domestic policy support against persistent global headwinds.

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