US tariffs not priced in yet; Nifty may hit 26,000 by March 2026: Emkay

Emkay analysts believe a possible US recession from tariffs could reduce Nifty's FY26 earnings by 3 per cent, potentially derating the index to 21,500 in the near-term.

With the United States (US) imposing tariffs on, nearly, all the countries in the world, including India, the outlook for global trade as well as the US economic growth stands distorted. Given this, analysts at Emkay Global Financial Services expect India to feel a "second order" impact of a potential US recession, which could likely hurt India Inc earnings in the current financial year of 2025-26 (FY26).

 

Against this, analysts at the brokerage, now, expect the Nifty50 to touch the 26,000-mark by March 2026, rather than in December 2025 as the impact of US tariffs, they believe, is not priced in yet.

 

 

The adjustment also comes on the back of a revised Nifty earnings per share (EPS) forecast of ₹1,320 for FY27, and a target valuation of 20x, aligned with the long-term average (LTA).

 

“Longer-term projections are risky, given the lack of visibility on both policy actions and their longer-term implications. We are, nevertheless, rolling forward our long-term Nifty target to March-26 (from December-25) to 26,000: based on the revised Nifty EPS of ₹1,320 for FY27 and a target valuation at the LTA of 20x,” Emkay said, in a note.

 

According to analysts, while the direct impact of tariffs announced by US President Donald Trump on India is expected to be muted, the second-order effects could be major. 

 

Analysts noted that a possible US recession triggered by these tariffs poses a 3 per cent downside risk to the Nifty's earnings in FY26. The downturn, they believe, could lead to a derating of the index, pushing it down to 21,500 in the near-term.

 

Emkay’s analysts also pointed out that while India's exports to the US will be impacted by the reciprocal tariffs, the real concern lies in the broader economic fallout. 

 

They forecast that a severe US recession would likely drive a short-term correction in global commodities, particularly in metals and technology stocks. Given that metals contribute majorly to Nifty EPS, this sector is particularly vulnerable. Technology earnings, which were previously expected to recover, may now face cuts as well. The auto and chemicals sectors are also at risk, according to Emkay's note.

 

“We see a 3 per cent proforma risk to our Nifty EPS estimate (FY26: ₹1,160), mainly from Tech earnings cuts, given that consensus was building in a recovery. Metals, a large contributor to the FY26 Nifty EPSg, is also now vulnerable as new capacity comes on stream and lower prices could hurt,” Emkay said.

 

Near-term outlook 

 

In the short-term, Emkay sees further downside risks for Indian equities in Q1FY26, despite the initial complacent response to the US tariffs. However, the firm also sees some silver lining in sectors that are relatively insulated from global turmoil, especially in financials. 

 

Financial stocks, particularly non-banking financial companies (NBFCs), are expected to benefit from positive system liquidity created by the Reserve Bank of India's (RBI) aggressive policies.

 

Meanwhile, Emkay remains neutral on IT stocks, noting that while earnings risks are present, valuations are nearing levels where the sector typically begins to recover. 

 

Consumer discretionary stocks, including autos, remain Emkay analysts’ preferred sector. They are particularly optimistic about the potential for a recovery in consumer lending, especially with the RBI's supportive stance.

 

India’s response to tariffs

 

India is unlikely to impose retaliatory tariffs on the US, as the probability of such an outcome is near zero, analysts said. 

 

Instead, Emkay anticipates that India might engage in negotiations and potentially lower import duties, without posing major earnings risks to domestic companies. Additionally, the RBI is expected to intensify pro-cyclical policies to counteract the contractionary effects of slowing global trade.

 

However, analysts do not foresee any immediate change in fiscal policy. The Indian government is unlikely to ease both monetary and fiscal policies simultaneously, as doing so could jeopardise macro-financial stability in a period of heightened global uncertainty.

 

Risks and opportunities ahead

 

According to Emkay, the current market scenario is fraught with extreme uncertainty, with both positive and negative triggers that could influence the economy, earnings, and equity markets. 

 

A potential rollback of tariffs could be a major upside for India, especially if the US recession is deeper than anticipated. Additionally, global coordinated monetary easing could bring capital inflows into risky assets, positioning India to benefit from stronger equity market flows.

 

On the downside, an intensification of tariffs, such as the inclusion of pharmaceuticals in future rounds of sanctions, could lead to further earnings risks for Indian companies. This would be compounded by a potential price-earnings (P/E) derating in the broader market.

 

That said, while the road ahead is uncertain, Emkay's revised outlook on the Nifty, with a target of 26,000 by March 2026, reflects confidence in long-term earnings growth, despite the challenges posed by the US tariffs. 

 

Analysts caution, however, that the immediate term could bring major volatility, especially if the global recession unfolds as expected and affects key sectors in India.