PL Capital has decreased its 12-month base-case goal for Nifty by over 5 per cent to 25,689, implying a 14 per cent upside from present ranges.
Indian markets have seen decrease attractiveness because of decrease development and wealthy valuations compared to different markets and excessive US 10-year treasury yields and rupee depreciation have raised breakeven returns to greater than 10 per cent.
PL Capital expects the markets to stay risky within the close to time period however stabilise in direction of the tip of this quarter. The affect of varied authorities initiatives and monsoons will doubtless begin reflecting in improved shopper demand within the second quarter of FY26.
FIIs are promoting because of international uncertainty and a weak rupee, it mentioned. FIIs have pulled out $20.2 billion from Indian equities and bonds since October final yr, marking one of many steepest outflows in latest historical past.
PL Capital has calculated the hurdle charge for FII investments in India and estimates that the cut-off charge has risen to 10.5 per cent assuming 4 per cent INR depreciation, capital positive aspects tax and 4.5 per cent 10-year US treasury charge in India.
“The shortage of sturdy home buffers, persistent international uncertainty, tepid home demand and sustained FDI outflows pose a near-term threat to volatility in forex and FPI flows in India,” it mentioned.
Funds affect
The analysis home believes the expansion outlook in India seems to be much better in FY26 than in FY25. “Because the affect of the Funds begins getting mirrored in increased capex on a low base and tax cuts and monsoons revive shopper demand, we should always see FPI flows turning constructive. Nonetheless, FDI outflows stay a lingering downside that may pressurise INR and add to volatility,” it mentioned.
PL Capital has turned obese on the patron house because of an anticipated uptick in demand following tax cuts, a decline in meals inflation and a reduce in repo charge, and has elevated weight in banks and healthcare.
India is unlikely to expertise any significant damaging results from US insurance policies, as mushy crude oil costs, geopolitical stability and elevated expertise switch to India will neutralise the prices of Trump’s tariffs. The reciprocal tariffs introduced by the Trump 2.0 administration, incorporating non-tariff obstacles, VAT constructions, and alternate charge deviations, make the method extra complicated and its financial price more durable to quantify as of now.
“Whereas tariff negotiations will stay a short-term market overhang, the structural basis of the India-US commerce stays intact. Know-how, defence and nuclear vitality have excessive development potential. India’s skill to navigate tariff negotiations, leverage its geopolitical positioning and realign provide chains ensures that this section is a momentary recalibration, not a retreat,” PL Capital mentioned.
