Bulls eye! Sensex seen at 87,000, Nifty at 27,000 by next Diwali: Experts

Analysts expect Sensex and Nifty to reach new highs in Samvat 2083 on the back of comfort in valuations and earnings-led growth.

Photo: Kamlesh Pednekar

Saloni Goel New Delhi

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Backed by corporate earnings revival and moderating valuation excesses, analysts expect the benchmark indices to rise to new highs in the upcoming Samvat, which kicks off on November 8 this year. However, they advise against expecting a broad-based recovery, with the next phase seen as selective and measured.

On a more optimistic note, Vinit Bolinjkar, head of research at Ventura, said he sees Nifty reaching 26,500–27,000 by the next Samvat year, implying an upside of roughly 11–13 per cent from the current level of 23,700. This would broadly correspond to a Sensex range of 85,500–87,000, he added.

Seema Srivastava, senior research analyst at SMC Global, said that Nifty 50 is projected to trade within a recovery range of 25,000 to 26,500, while the BSE Sensex is estimated to target between 82,000 and 87,000 as a "structural revival can strongly be expected following the past two years of consolidation".

Anand Rathi Advisors' Mayur Shah also expects a breach of previous highs in Samvat 2083, with the revival seen to be faster in case the geopolitical issues resolve and global energy supply sees some mean revision.

Hitesh Jain, Strategist - Institutional Equities Research, YES Securities, although, has a more conservative outlook as he sees an 8-9 per cent upside from the current levels. Also Read | NSE, BSE to hold Diwali Muhurat Trading on Nov 8; check timings

"Investors should moderate their return expectations. We expect the Nifty to deliver single-digit returns over the next one to two years, reflecting the challenges posed by elevated global and domestic bond yields, foreign investor outflows and relatively subdued earnings growth," he opined.

Sensex and Nifty have been in a consolidated mode for over two years now, with both indices down 4 per cent during this period (between November 1, 2024 and November 2, 2026). Meanwhile, in the ongoing Samvat year, Sensex has lost 7.9 per cent while Nifty is down 6.8 per cent.

Various factors, including foreign investor outflows, valuation concerns, and oil price spikes, along with US tariffs, have marred their performance.

Srivastava believes that this prolonged phase of sideways movement and time-correction has successfully absorbed macro shocks, allowing corporate earnings to catch up with elevated market prices and setting the stage for a healthier, more sustainable upward trajectory.ALSO READ: Markets in Samvat 2083: 6 key risks D-St should watch out for in new year

What could drive market rebound?

Going ahead, analysts believe the market's recovery will likely be led by earnings improvement and selective valuation re-rating rather than a substantial expansion in benchmark multiples.

"A healthier index composition, stronger earnings contribution from growth sectors and reasonable forward valuations should support a gradual rerating, provided macro conditions remain stable and corporate earnings delivery improves," Bolinjkar said.

He sees index churn to drive Nifty's earnings performance, wherein slower-growth businesses, particularly select OMCs, will lose relevance over time, while higher-growth companies from capital goods, automobiles and pharmaceuticals would gain representation.

Alongside, he noted that Nifty currently trades at around 19.6x trailing earnings, while Ventura estimates the forward valuation of a revamped, higher-growth index closer to 17x earnings.

Analysts also expect significant divergence across sectors and companies even as a sustained recovery is possible. Investors should therefore, said Jain, focus on identifying businesses that can deliver consistent earnings growth at reasonable valuations.

The prolonged correction in several large-cap stocks has created opportunities for long-term investors, analysts opined, but added that the market is not uniformly inexpensive, particularly across pockets of the mid- and small-cap universe.

Elevated bond yields in India and globally could continue to compete with equities for capital. Sustained FPI outflows, rupee depreciation, elevated crude oil prices and geopolitical uncertainty remain key risks.