Market forecast 2026: UBS, Franklin Templeton AMC, Emkay, others decode

Don't want to miss the best from Business Standard?

It has been a volatile year for the Indian stock markets as they grappled with headwinds related to US tariffs at the global level and subdued corporate earnings growth back home. 

 

While Budget 2025 and the cut in goods and services tax (GST) rates provided relief to consumer and rekindled hope of a consumption-led rally in the markets, global geopolitical situation and stiff tariffs imposed by the US on India kept the sentiment in check.

 

That said, most brokerages remain optimistic on the road ahead for the Indian equity markets and expect the Sensex to hit new highs in 2026 provided earnings remain supportive, US tariff tensions ease and the geopolitical situation does not worsen.

 

Here’s how leading Indian and foreign brokerages expect the next 12 months to play out for the markets, corporate earnings and their strategy in this backdrop.

 

Morgan Stanley

 

With the growth cycle turning, Indian equities appear poised to recover from a steep relative correction since the end of September 2024.  In a bull-case scenario, the Sensex can hit 107,000 mark by December 2026. Our market overweight on India and relatively high stock exposure to India's domestic demand in our focus lists help to diversify risk at the overall portfolio level whilst being fundamentally attractive in their own right.

 

Goldman Sachs

 

Reliance Industries (RIL), Havells India, Titan Company, NASDAQ-listed MakeMyTrip and PTC Industries are in our ‘conviction list’ for the Asia Pacific (APAC) region. See upside in the range of 14 per cent to 54 per cent in these stocks over the next 12 months. Biggest ‘conviction’ as regards India is on the defence sector where PTC Industries is scores over its peers. Solar Industries, too, remains on the radar given the company’s unique moat in high energetic materials. 

 

UBS

 

Our EM strategy team is underweight on India. Valuations still look expensive relative to the ordinary fundamental performance of companies. While retail flow still supports the market, selling pressure from foreign investors and (increasingly) IPO/capital-raising activity by corporates must be watched. India lacks any direct AI beneficiary stocks, unlike other larger markets. Among sectors, we prefer banks and consumer staples.

 

Franklin Templeton Asset Management

 

FY26 is likely to deliver modest single-digit growth, while FY27 looks stronger at 16-17 per cent, led by financials. Overall, 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. 

 

Emkay Global

 

We expect an earnings recovery in the second half of FY2025-26 (H2-FY26) on the back of consumption bounce-back, and one key positive is that the asking rate for Nifty is a moderate 9 per cent. Valuations are now stretched with the Nifty price-earnings (PE) of 20.6 trading at +1sd (1 standard deviation) above long-term average (LTA). 

 

A worrying 45 per cent of the consensus universe trading at over +1sd above LTA. We maintain our Nifty target of 28,000 for September 2026 and see moderate returns from here. Sector and stock selection will be key. Our top overweight remains consumer durables sector. We add Radico Khaitan to our model portfolio and replace Bajaj Finance with Bajaj Finserv.