Bernstein expects markets to consolidate; sees Nifty at 26,500 by 2025-end

As a strategy, they have moved utilities sector to equal weight. Financials, Telecom, small discretionary, remain their overweight sectors.

After a sharp run from April lows that saw the Nifty 50 index rise nearly 13 per cent till date, analysts at Bernstein expect the markets to undergo a consolidation phase amid mixed macro-economic signals. 

 

They maintain a calendar year-end target of 26,500 for the Nifty 50, which is a modest 5.1 per cent higher from the current levels.

 

“It will not be heading directly to that level - we expect a bit of consolidation before the next move. From a sector perspective, we shift some weights from utilities to staples - moving into a tactical overweight for a short period,” wrote Venugopal Garre, managing director and India head of research at Bernstein in a coauthored note with Nikhil Arela.  

 

As a strategy, they have moved utilities sector to equal weight. Financials, telecom and discretionary, remain their overweight sectors. 

 

Economic indicators

 

On the macro front, Bernstein cautions, there are growing signs that economic momentum is moderating, as reflected in recent high-frequency indicators. 

 

Industrial activity appears to be softening, with the Index of Industrial Production hitting a nine-month low in May, mirrored by a similar dip in core sectors.  Power demand, and oil and gas production, have moderated in April-May while passenger vehicle sales remain subdued and air traffic growth shows signs of cooling. Credit growth, too, moderated.  

Sectoral performance

 

However, there are counterbalancing trends—steel and coal production have outperformed recent averages, while cement too is strong, supported in part by rising petcoke consumption. 

 

On the consumer front, several consumer companies spread across FMCG and retail have delivered positive Q1FY26 commentary, highlighting sequential improvements in volume growth. 

 

Power demand has rebounded in the past few weeks, and petrol consumption has picked up as well. Some demand fluctuations may also be attributable to the early arrival of the monsoon.  

 

"Overall, the data presents a mixed picture—pockets of resilience are evident, but the broader trend suggests a more moderate phase of economic expansion, rather than a sustained acceleration," Bernstein notes.

 

Viewpoint

 

How one views the economic environment hinges on perspective, the note said. Those who believe India’s growth will stabilize around 6.5 per cent set quite different expectations compared to those anticipating a return to sustained 8 per cent+ growth. 

 

Bernstein's assessment aligns with the first view, as they find the present catalysts insufficient to drive India back to 8 per cent+ growth on a consistent basis.

 

“While the strain is evident and the Government appears to be relatively quieter than in NDA 1.0 and 2.0 (as evident from limited economic announcements pre- and post-budget) a supportive base, improving liquidity and limited risks from global sources should continue to support a 6.5 per cent range of the economy this year. We do not see us in a phase of collapse seen in mid-2024, protecting downside risks,” the note said.