BofA sees Nifty at 29,000 in 2026 as earnings drive market returns

Bank of America has set a Nifty target of 29,000 for 2026, saying limited valuation upside means returns will hinge on earnings growth, with large-caps expected to outperform mid- and small-caps

Bank of America (BofA) has set a Nifty target of 29,000 for calendar year 2026, which implies 11 per cent upside from current levels.

 

Why does BofA expect earnings, not valuations, to drive returns?

 

The brokerage said valuation expansion is unlikely, and market upside will instead have to come from earnings growth. The Nifty currently trades at 21x one-year forward earnings, one standard deviation (+1 SD) above its long-term average.

 

“Our analysis over the past two decades suggests the Nifty sustains higher valuations only during periods of strong earnings growth or upgrades, which is unlikely next year. Based on the current earnings cycle, the Nifty deserves to trade slightly above long-term averages at 19.6x but could continue to hold its current +1 SD valuations supported by robust domestic flows. Given the limited scope for valuation expansion, Nifty returns would mirror earnings growth,” said Amish Shah, head of India research at BofA, in a note.

 

 

Which segments of the market does BofA expect to outperform?

 

BofA expects large-caps to continue outperforming mid- and small-cap stocks, in line with this year’s trend. Within the small- and mid-cap universe, BofA sees opportunities in financials, IT, chemicals, jewellery, consumer durables and hotels.

 

How have earnings estimates for the Nifty changed?

 

During calendar 2025, earnings estimates for Nifty 50 companies were cut by 11 per cent for FY26 and 6 per cent for FY27. Shah expects the pace of downgrades to ease, as consensus FY26 and FY27 growth estimates of 6 per cent and 16 per cent are now closer to BofA’s projections of 7 per cent and 14 per cent, respectively.

 

What could drive stronger earnings growth in FY27?

 

Earnings growth in FY27 could accelerate, driven by higher loan growth for financials, discretionary demand supported by possible GST cuts, telecom tariff hikes, firmer non-ferrous metal prices, and a very low base for IT and staples, the note added.