Rate Cuts, Tax Breaks Could Lift Nifty 50 To 30,000 By 2026: JP Morgan

India's benchmark Nifty 50 index could climb to 30,000 by end-2026, implying an upside of about 15% from current levels, supported by steady fiscal and monetary policy that are expected to fuel demand, JP Morgan said on Wednesday.

The Nifty and its peer Sensex are now at 26,205.3 and 85,609.51, just shy of record highs touched in September 2024, as earnings improve against a backdrop of steady growth, benign inflation and robust domestic flows.

A Reuters poll of economists expect the Nifty to hit 28,500 by the end of 2026 and 28,850 by mid-2027.

The Nifty has gained nearly 11% this year but still lags Asian and emerging market peers, a soft patch for India after more than a year of weak earnings and sustained foreign outflows.

While market valuations are still at a premium to other emerging markets, they have eased below their long-term average after 14 months of underperformance, according to analysts Rajiv Batra and Rushit Mehta.

The recent tax cut-led drop in inflation and steep rate cuts by the central bank are likely to boost domestic demand, they said.

The brokerage expects the Reserve Bank of India to reduce rates by another 25 basis points in December, amplifying the impact of tax reductions that are already lifting consumption, credit growth and auto sales.

JP Morgan maintained its preference for domestic-facing sectors over exporters, adding that a US-India trade deal could spark a near-term re-rating.

With India ramping up petroleum imports from the US and scaling back crude purchases from Russia, the analysts see "the probability of resolution of penal US tariffs of India" as very high, with the additional 25% levy likely to be removed.

That would bolster investor confidence, attract foreign inflows, firm up the rupee and aid a rebound in IT and pharma stocks, they said.

The brokerage remains "overweight" on materials, financials, consumer sectors, hospitals, real estate, defence and power, and "underweight" on IT and pharma.

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