Brokerages remain bullish on markets for 2026 as Sensex hits new high

Most brokerages expect the markets to remain buoyant in the year ahead, led by a pick-up in earnings and reversal of foreign flows. The BSE Sensex hit a new life-time high at 86,055.86 in intra-day trade on Thursday.

 

While the most optimistic scenario by Morgan Stanley sees the Sensex at 107,000 by December 2026 translating into an upside of around 24 per cent from the current levels, analysts at HSBC have set a target of 94,000 for the Sensex by 2026-end, up around 9.3 per cent from the current levels. India, they said in a recent note, offers better value compared to China.

 

Indian Markets, according to a Bernstein analysis, tend to show strong alternate relationship with US and Chinese markets. For the US markets, there were 2-3 years of continuous underperformance, followed by a year of sharp spike in the last 11 years. Relative to China, they said, the Indian markets have been seeing two years of underperformance followed by 3 years of outperformance for the last 11 years.

 

"Interestingly, both signs point to the underperformance phase ending in 2025 – the Nifty index has underperformed the S&P 500 in US dollar terms for last 3 years, and the Shanghai composite for last two years. This trend points to an impending reversal for coming year, hinting at an outperformance of Indian markets over these indices in 2026," wrote Venugopal Garre, managing director at Bernstein. 

 

At the bourses, meanwhile, the Sensex has surged 20.4 per cent, or 14,601 points, from its calendar-year low of 71,425 hit on April 04, 2025 to Thursday's intra-day high.  ALSO READ | Sensex hits new high, surged over 14% post breakout in past; check outlook

Earnings growth

Market upside from here on, analysts said, will depend on how the US tariffs on India play out along with an uptick in earnings back home. Global geopolitical situation, interest rate trajectory of central banks, crude oil prices and foreign flows are the other factors, they suggest, will determine how the markets play out in 2026.

 

Earnings, said analysts at Emkay, are expected to recover in the second half of FY2025-26 (H2-FY26) on the back of consumption bounce-back. The key to beating the markets in 2026, believe analysts at Franklin Templeton Asset Management will depend on stock selection.

 

“FY27 earnings at 16-17 per cent look strong, led by financials. Fundamentals remain healthy, and valuations across sectors appear fair rather than stretched. While markets are not inexpensive, improving macro fundamentals make many stocks reasonably valued. Deep bargains are limited, but selective opportunities exist amid expectations of a broader recovery,” they wrote in a recent report.  ALSO READ | Sensex, Nifty hit record highs: Analysts pick sectors to invest in markets 

Earnings, HSBC also believes, are set to recover in the year ahead. “Banks' margins will expand in coming quarters and consumer names, including autos, are set to benefit from GST reductions and lower interest rates,” wrote Herald van der Linde, Head of Equity Strategy for Asia Pacific at HSBC in a recent note.

 

After an absence of 12 months, HSBC believes conditions are right for foreign funds to start to return, led by external factors. Fund positioning in Korea and Taiwan – largely funded by the sale of Indian equities, they said, is now very crowded; and any negative news on AI could reverse these flows.

 

“Despite a weak USD and the resumption of rate cuts by the US Fed, rotation into EM has not materialised yet. India stands to be an outsized beneficiary should this happen. While US tariffs will have a limited impact on earnings, any positive trade developments could trigger flows from investors sitting on the sidelines,” said an HSBC note.