Nifty 2026 Outlook: Qode Advisors Sees Limited Upside

India's Market Remains Cautious Amid Global Uncertainty

The Indian market's performance in the March quarter earnings season has been characterized by cautious optimism, according to Gaurav Didwania, Partner and Fund Manager at Qode Advisors. Despite domestic demand holding up, the global uncertainty has significantly compressed the visibility of management teams, leading to conservative guidance for the upcoming financial year.

Domestic demand in India is expected to continue driving growth, with the Economic Survey projecting 6.8 to 7.2 percent growth for FY27. However, real GDP growth for FY26 is estimated at 7.4 percent, and the slow recovery of China and the India-US trade deal uncertainty are still pressing concerns.

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The IT sector has seen soft guidance, with Infosys guiding for 1.5 to 3.5 percent revenue growth in FY27, which has disappointed the street. Meanwhile, the autos sector looks better driven by strong domestic demand and GST tailwinds, but margins may face pressure if crude prices remain elevated.

Banks are mixed, with credit growth being supportive but asset quality and funding cost pressures being worth watching. The broad theme from management teams this season is cautious optimism, with most guiding conservatively rather than risk being caught on the wrong side of an oil spike or a further geopolitical escalation.

The second half of 2026 could be more interesting if the West Asia situation stabilizes and FY27 earnings visibility improves. However, for now, this is very much a stock picker's market rather than a broad index rally kind of environment. Chasing the index aggressively at these levels does not make a lot of sense.

The Indian market is expected to remain range-bound, with upside limited to 5-7 percent from current levels this year. The Nifty is in a consolidation phase, with some underlying strength but resistance and cautious sentiment. The 5 to 7 percent upside for the year sounds about right given where valuations are and with FII outflows still being a drag.

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The RBI is already dealing with elevated energy costs driven by the West Asia conflict, and a below-normal monsoon season would push food inflation higher at the wrong time. The combination of an AI headwind and a weak monsoon would be a meaningful double blow to sentiment and earnings.

Oil prices are expected to remain above $100 per barrel for the next quarter or so, with Brent crude averaging around $103 a barrel in March and widely expected to peak around $115 in the second quarter of 2026 before easing. However, if the Strait of Hormuz situation resolves, prices could correct quite sharply.