Jefferies Nifty Forecast: 28,300 Target by 2026! Earnings Surge or Supply Trap? Top Sectors Revealed!

Nifty Poised for 28,300 Target by 2026, Jefferies Predicts Earnings-Driven Growth

International brokerage house Jefferies has projected a significant upward trajectory for India's benchmark Nifty index, setting a target of 28,300 by December 2026. This forecast suggests a potential gain of another 10% from current levels. The brokerage firmly believes that this advance will be powered by a robust improvement in corporate earnings rather than an expansion of stock market valuations.

Earnings Recovery to Drive Growth

Jefferies highlights that India's earnings cycle is showing signs of a turnaround. The firm anticipates that MSCI India's Earnings Per Share (EPS) growth will accelerate from approximately 8-9% in Fiscal Year 2026 to around 13-14% in Fiscal Year 2027. This anticipated earnings rebound is expected to position India favorably compared to many other Emerging Markets during Calendar Year 2026.

The report indicates that sectors like lending financials, autos, power, cement, and telecom are poised for faster profit growth. This is attributed to supportive factors such as low base effects from previous periods and beneficial policy measures. Jefferies also suggests that a gradual increase in inflation could positively impact revenues and margins, rather than posing a threat.

Equity Supply Concerns May Temper Gains

Despite the optimistic outlook on earnings, Jefferies issued a word of caution regarding persistent equity supply pressures. The market is currently experiencing substantial equity issuance, with volumes around $7–8 billion per month. This inflow, driven by initial public offerings (IPOs), block deals, and exits by promoters and private equity firms, is expected to create a ceiling for broader market gains.

Jefferies estimates a pipeline of $50–70 billion in equity supply for 2026. This substantial supply means the brokerage does not foresee room for sustained index rerating, even with strong domestic inflows supporting the market. The Nifty currently trades above its long-term average, with its valuation premium over Emerging Markets cooling to approximately 64%, which is close to historical norms.

Top Sectors Poised for Outperformance

Jefferies has identified several sectors that are expected to outperform the broader index:

Lending Financials: This sector holds Jefferies' highest conviction. The brokerage maintains an overweight position, anticipating credit growth of 11-13% between FY26 and FY28. Supportive factors include tax and GST cuts, increasing lender comfort with unsecured loans, and improving margins as deposits reprice and CRR cuts are passed on. Asset quality trends are strengthening, keeping credit costs controlled.

Autos and Consumer Discretionary: Autos are highlighted as a preferred consumption play. GST cuts and low base effects are expected to boost demand recovery and earnings. The anticipated rollout of the 8th Central Pay Commission from FY27/FY28 could further stimulate discretionary spending. The preference for higher-end vehicles is also seen as positive for profitability, with auto earnings projected to improve sharply in FY27.

Cement: Jefferies rates cement as a strong earnings story, forecasting 25%+ EPS growth in both FY26 and FY27. This is driven by margin recovery and a turnaround in pricing, which is currently at multi-year lows. Demand from housing and infrastructure projects provides structural support.

Telecom: Identified as a preferred mass consumption play, the telecom sector is expected to benefit from potential tariff increases, improved Average Revenue Per User (ARPU), and strong cash flow generation. Jefferies forecasts 20%+ earnings growth in FY26 and FY27 for this sector.

Real Estate: The brokerage believes the housing cycle is far from over. With inventory levels at 14-year lows and low developer leverage, coupled with potential mortgage rate drops to around 7.0% in early 2026, mid-income demand is expected to revive, potentially lifting housing volumes by 10%. Property stocks underperformed the Nifty in 2025, presenting a valuation opportunity.

Utilities and Power: Viewed as recovery plays, these sectors were impacted by weak demand from weather disruptions. Earnings are anticipated to improve from a low base, supported by increased investment in data centers, electric vehicles (EVs), and renewable energy.

Future Outlook

Jefferies is not predicting a runaway bull market for 2026. Instead, the focus will be on earnings recovery and smart sector selection. Investors are advised to concentrate on sectors where profit growth is projected to outpace the broader market, given the limitations imposed by ongoing equity supply.

Impact Rating

Impact: 9/10

Difficult Terms Explained

Nifty: A stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange of India.
Brokerage House: A firm that buys and sells stocks and other securities on behalf of its clients.
Corporate Earnings: The profit a company has made over a specific period.
Valuation Expansion: An increase in the market's perceived worth of a company or asset, often reflected in higher price-to-earnings (P/E) ratios or other metrics.
Equity Supply Pressures: The ongoing availability of new shares in the market, which can dilute existing holdings and limit price increases.
IPOs (Initial Public Offerings): The first time a private company offers shares to the public.
Block Deals: Large transactions involving a significant number of shares, typically negotiated privately between institutional investors.
Promoter Exits: When the original founders or major shareholders of a company sell a portion of their stake.
Private Equity Exits: When private equity firms sell their investments in companies.
MSCI India EPS: Earnings Per Share for Indian companies as calculated by MSCI, a global provider of equity, fixed income, currency, and commodities indices.
CY26 (Calendar Year 2026): Refers to the period from January 1, 2026, to December 31, 2026.
FY26 (Fiscal Year 2026): Refers to the financial year ending March 31, 2026.
Policy Rates: The interest rates set by a central bank, such as the Reserve Bank of India, which influence borrowing costs throughout the economy.
Low Base Effects: When a current period's growth rate appears high because the previous period's figures were unusually low.
PE Multiple: Price-to-Earnings ratio, a valuation metric indicating how much investors are willing to pay for each dollar of a company's earnings.
Valuation Premium: The extent to which a stock or market is trading at a higher valuation (e.g., higher P/E ratio) compared to its peers or historical averages.
Domestic Inflows: Investments made into the Indian market by domestic institutional investors like mutual funds.
Index Rerating: A sustained upward adjustment of an index's valuation multiple.
Lending Financials: Companies primarily involved in providing loans and credit services, including banks and non-banking financial companies (NBFCs).
Overweight Position: An investment recommendation from a brokerage suggesting that a particular asset or sector is likely to outperform its benchmark.
Credit Growth: The increase in the amount of credit extended by financial institutions.
Tax and GST Cuts: Reductions in Goods and Services Tax and other taxes that can boost corporate profitability.
CRR (Cash Reserve Ratio): The portion of total deposits that banks must hold in reserves with the central bank. A cut can increase liquidity.
Asset Quality: The risk profile of a financial institution's assets, particularly its loan portfolio.
Consumer Discretionary: Goods and services that consumers buy when they have enough income after covering essential needs.
8th Central Pay Commission: A government-appointed body that reviews and recommends changes to the pay structure of central government employees.
ARPU (Average Revenue Per User): A metric used in the telecom industry to measure the average revenue generated from each subscriber.
Housing Cycle: The cyclical pattern of growth and contraction in the housing market.
Inventory Levels: The amount of unsold housing units available.
Developer Leverage: The extent to which real estate developers rely on debt financing.
Mortgage Rates: The interest rates charged on home loans.
Pre-sales: Sales made by real estate developers before a project is completed.
Utilities and Power: Companies that provide essential services like electricity, water, and gas.
Data Centres: Facilities that house computer systems and associated components, such as telecommunications and storage systems.
EVs (Electric Vehicles): Vehicles that are powered wholly or partly by electricity.