Nifty 50 Seen Retesting 26,000 in Near Term, Alpha Capital Founder Predicts

Indian Stock Market: A Turning Point Ahead

The Indian stock market is poised for a turnaround, according to Akhil Bhardwaj, Senior Partner and Founder at Alpha Capital. Despite higher crude oil prices remaining a key risk, Bhardwaj believes that the worst is behind, and the market is likely to retest 26,000 in the near term.

Key Lessons from FY26

FY26 was a year of high valuations and dependence on global money flows, which proved to be a risk for the market. Despite India's GDP growth remaining steady at around 6.5-7%, corporate earnings fell short of expectations, with Nifty EPS growth being only 6-8%. This was mainly due to weak rural demand, pressure on IT margins, and global risk aversion. Foreign investors pulled out heavily, with net outflows crossing $18-20 billion for much of the year, while domestic institutions provided strong support with record inflows of about ₹1.7 lakh crore year-to-date.

Read also: SpaceX Seeks Record $75 Billion IPO, Potentially Positioning Elon Musk as the World's First Trillionaire

A Turning Point Ahead

Bhardwaj believes that the worst is behind, and the market is likely to deliver 15-20% returns in FY27. Valuations have cooled to around 19-20 times FY27 earnings, close to long-term averages. Earnings downgrades have stabilised, and supportive policies are in place, including RBI's rate cuts and liquidity measures, along with a fiscal deficit target of 4.3% of GDP focused on capex. Consensus expects Nifty EPS growth of 12-14% in FY27, supported by a revival in consumption and a capex cycle.

Sectoral Outlook

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Financials (banks and NBFCs) are expected to remain the backbone of the market, benefiting from lower interest rates, improving credit growth in retail and SME segments, and better asset quality. Consumption sectors like FMCG, autos, and durables will gain from rural recovery and steady urban incomes. Capital goods, infrastructure, and realty will be supported by government spending and PLI schemes. Defensive sectors such as pharma and utilities can provide stability amid oil volatility.

IT Sector: A Selective Value Opportunity

The IT sector has seen a sharp correction, with the Nifty IT index declining by nearly 25%. Valuations have come down to around 23 times, closer to its long-term average. While FY27 revenue guidance remains modest at 4-5% in constant currency due to AI-related pressures and cautious spending by US clients, large-cap companies with strong AI capabilities and deal wins in cloud and digital transformation are well placed for mid-single-digit growth and some margin improvement.

Earnings Trajectory and Crude Oil Shock

India Inc.'s earnings are on a slow but steady recovery path, with FY26 seeing subdued growth of around 8-10% in PAT. FY27 is expected to see acceleration to 12-17%, supported by easing costs, benefits from GST changes, and improving consumption and capex. The recent crude oil spike above $100 per barrel has delayed the recovery somewhat, but government steps such as excise duty cuts and subsidies have helped protect consumers and limit fiscal damage.

FPI Inflows: When to Expect a Return

FPI outflows in FY26 were indeed very sharp, driven by higher US yields, shifts in capital toward AI plays in the US and Taiwan, rupee weakness, and geopolitical worries. Domestic institutions absorbed a large part (around 70%) of this selling. Bhardwaj expects meaningful FPI inflows to resume by Q2 FY27, triggered by de-escalation in oil prices and rupee stabilisation, India's growth advantage, progress on trade deals, and attractive valuations.

Conclusion

In summary, FY26 was a year of consolidation and a healthy valuation reset. FY27 looks more promising, driven by improving earnings. At Alpha Capital, we remain constructive on Indian equities and prefer a Balanced Asset allocation approach.