Brokerage firm Bernstein expects a range-bound Indian stock market for the rest of 2026, keeping its Nifty 50 year-end target at 26,000. This cautious outlook reflects slowing profit growth and a massive rush of IPOs, which may absorb liquidity that would otherwise support the secondary market.
The Indian equity market is likely to remain in a range-bound environment through the remainder of 2026, according to a recent analysis by the brokerage firm Bernstein. The firm has maintained its year-end target for the Nifty 50 index at 26,000. This target suggests limited room for growth compared to current trading levels, as the market faces a combination of moderating corporate earnings and a heavy pipeline of new stock market listings.
Earnings Growth Divergence
The market narrative has been split by performance gaps between different sizes of companies. While the broader NSE200 index saw net profit growth slow to 8% in the June quarter, the story within the Nifty 50 was stronger, with earnings growth rising by 12.8%. However, the Nifty Next 50 index lagged significantly, with total earnings dropping by 4% year-on-year. This decline was heavily influenced by losses in state-run oil marketing companies, as well as weaker results from certain banks and cement manufacturers.
Bernstein noted that the room for positive surprises in company earnings is narrowing. Corporate profit growth faces pressure from tougher comparisons with the previous year, particularly as we move into the second half of 2026. Additionally, several sectors that previously acted as engines for growth, such as auto and metals, are showing signs of cooling off, while cement and power companies are also witnessing a slowdown.
Impact of IPO Rush and Liquidity
The brokerage also highlighted that the current influx of initial public offerings is expected to consume a significant amount of market liquidity. When large amounts of capital are directed toward new stock offerings, it can reduce the amount of money available to buy or support existing stocks in the secondary market. This supply of new shares creates a challenging environment for the market to move significantly higher.
Adjusting Portfolio Strategies
Reflecting the lack of a strong, single macro trend to lift all stocks, Bernstein has adjusted its India model portfolio to focus on specific stock catalysts. The firm added Eternal to its list, citing the company's progress in quick commerce. One97 Communications, the parent company of Paytm, was also included, with the brokerage noting potential gains from merchant discount rates. Additionally, Adani Ports & SEZ was re-added to the model portfolio following a price correction, with the firm highlighting its pricing power and business operations. Conversely, Avenue Supermarts was removed from the portfolio, as the firm cited recent outperformance and growing competitive pressures in the retail space.
Investors may monitor how corporate earnings hold up against these challenging comparisons in the coming months, as well as how the secondary market absorbs the heavy supply of upcoming IPOs.