PL Capital sees Nifty at 28,781 in 1 yr; banks, auto, defence to lead rally

Holding steady amid global headwinds, domestic brokerage PL Capital expects Indian markets to remain resilient and domestic-oriented sectors to drive the next leg of growth. The brokerage has set a 12-month Nifty target of 28,781, valuing it at 19.2x September’27 earnings per share (EPS), compared to its previous estimate of 27,609.

 

“We value Nifty at 15-year average PE at 19.2x Sep27 EPS and arrive at a 12-month target of 28,781 (27,609 earlier),” said Amnish Aggarwal of PL Capital.

 

Despite global uncertainty, from rising US tariffs and visa fee hikes to fragile geopolitics, PL Capital analysts note that India has largely absorbed external shocks, aided by normal monsoons, strong domestic demand, and policy support. The government’s 43 per cent year-on-year (Y-o-Y) jump in capital expenditure during the first five months of FY26 has been a key growth lever, though spending is expected to remain flat in the remainder of the year unless new allocations are announced.

 

 

While foreign institutional investors (FIIs) sold ₹85,000 crore in recent months, Indian markets have held steady, underpinned by improving domestic fundamentals. The implementation of GST 2.0 and expectations of a revival in consumption demand are seen as critical tailwinds. PL Capital points to multiple drivers like a normal monsoon, benign inflation, a 100-basis-point cut in interest rates, GST rate reductions on discretionary goods, and the benefits of tax cuts in the FY26 Budget.

 

“The conditions seem ripe for a broad-based demand revival,” analysts wrote, highlighting that a strong festive season has already led to follow-on buying, particularly in autos and consumer durables. They added that the implementation of the 8th Pay Commission in 2026 could provide “another trigger to demand and sustain momentum into FY27.”

 

Sectoral Outlook

 

Analysts at PL Capital expect domestic-oriented sectors to outperform, naming banks, NBFCs, autos, retail, consumer staples, defence, metals, and select consumer durables as top picks. “We expect these sectors to lead earnings recovery as domestic liquidity and demand revive in the second half of FY26,” the brokerage said.

Top stock picks

 

In the Large Capspace, PL Capital is betting on Adani Port & SEZ, Apollo Hospitals Enterprise, Britannia Industries, Hindustan Aeronautics, ICICI Bank, ITC, Lupin, Larsen & Toubro, Mahindra & Mahindra, State Bank of India, Tata Steel, and Titan Company.

 

Likewise, in the Mid / Small Caps space, the brokerage is upbeat on Amber Enterprises India, DOMS Industries, Eris Lifesciences, KEI Industries, Latent View Analytics, Samhi Hotels, and Voltamp Transformers.

Earnings estimates

In the second quarter of FY26 (Q2FY26), PL Capital estimates 9.7 per cent sales growth, 11.2 per cent Ebitda growth, and 9.9 per cent profit before tax (PBT) growth across its coverage universe. Excluding Oil & Gas, Ebitda and PBT are seen rising by 9.7 per cent and 6.1 per cent, respectively. Commodities such as metals, cement, and oil & gas, along with telecom, asset management, and Electronics Manufacturing Services (EMS), are expected to be key growth drivers.

 

Cement, metals, and oil & gas are likely to post strong Ebitda gains of 54.9 per cent, 25.7 per cent, and 25.2 per cent, respectively, aided by a low base, lower input costs, and improved refining margins. Double-digit Ebitda growth is also projected for autos, building materials, capital goods, consumer durables, hospitals, and financial services.

 

Aggregate Ebitda margins are expected to expand by 28 basis points, supported by a sharp margin expansion of 150–450 bps in cement, metals, and oil & gas.

Earnings & valuations

 

PL Capital has trimmed its FY26 and FY27 Nifty EPS estimates by 1.9 per cent and 2.1 per cent, forecasting a 12.1 per cent compound annual growth rate (CAGR) in EPS between FY25 and FY27 to ₹1,229 and ₹1,415, respectively. The brokerage also introduced FY28 Nifty EPS at ₹1,582, implying continued earnings growth momentum.

 

While consensus estimates have seen sharper EPS cuts of 3.9 per cent and 4.3 per cent for FY26 and FY27, PL Capital’s projections remain slightly higher than the Street for FY26 but marginally lower for FY27-28. Analysts note that Nifty’s current valuation of 19x one-year forward EPS is at a 1 per cent discount to its 15-year average PE and 5.5 per cent below its 10-year average of 20.1x, leaving room for moderate upside.

Macroeconomic view

 

PL Capital expects urban sentiment to improve steadily, aided by lower rates, GST rationalisation, and tax cuts. However, rural sentiment remains soft following crop damage from late monsoon rains. Analysts believe credit growth should pick up in H2FY26, benefitting banks and NBFCs as lower lending rates feed through to the economy.

 

That said, PL Capital maintains a constructive stance on India, arguing that rising GCC exports, healthy domestic demand, and government policy continuity will offset global headwinds, setting the stage for a gradual yet broad-based recovery led by domestic sectors.