Nifty 50 has suffered a massive loss of almost 9% in the first half of calendar year 2026, driven by the Middle East conflict, elevated crude oil prices, weak earnings, and heavy foreign capital outflows. According to AlfAccurate Advisors' Rajesh Kothari and *Helios Mutual Fund'*s Dinshaw Irani, Indian equities could deliver 10-15% upside over the next nine to 12 months as key macroeconomic headwinds begin to fade. Speaking to CNBC-TV18, Kothari stated that 'the worst phase for the market appears to be over', with falling crude oil prices, easing inflation concerns and improving foreign fund flows creating a more favourable backdrop for equities. Seshadri Sen, Head of Research at Emkay Global Financial Services, believes the Indian stock market is primed for a solid rebound in H2CY26, driven by external risks receding and strong domestic growth, though he notes there are clouds of doubt on earnings recovery.
Both fund managers identified several key factors contributing to the improved market outlook. Kothari noted that 'as crude oil goes down, inflation comes down, the fear of interest rate hikes goes down, and slowly currency depreciation will also reverse'. The fund manager expects that 'outflows will reduce' as these economic conditions improve. Oil prices have corrected by over 20% from their March peak, with Brent crude trading slightly above $73 per barrel on Tuesday. The rupee has risen to a six-week high of 84.33 against the dollar, supported by lower oil prices and strong capital inflows following the US-Iran peace deal. FPIs have sold Indian equities worth ₹2,74,272 crore till 30 June this year, but the intensity of FPI selling has receded with foreign investors turning into sporadic buyers in the second half of June. Shrikant Chouhan from Kotak Securities believes a rapid normalisation in global oil and gas supply may ease India's macroeconomic pressures in H1FY27, especially if crude oil prices were to fall below $65 per barrel. According to JM Financial's Deepak Gupta, the Reserve Bank of India's efforts to stabilise currency volatility, particularly through the recently announced FCNR deposit scheme, as a key positive catalyst.
Kothari expects corporate earnings growth to improve meaningfully in the second half of the financial year after a relatively soft start. According to his analysis reported by CNBC-TV18, 'the first quarter may be a little challenging, but as we move into the second and third quarters, things should improve considerably'. However, Nifty 50 companies posted adjusted net profit growth of just 4.5% YoY in Q4FY26 - the eighth consecutive quarter of single-digit or weak growth - and their share in India Inc.'s total earnings fell to 47.1%, the lowest in 21 quarters. As per Thakurta, the earnings outlook remains healthy, with Nifty 50 companies expected to grow earnings by 12% in FY27 and 14% in FY28. Kotak Securities estimates the EPS of the Nifty 50 index at ₹1,248 for FY27 and ₹1,430 for FY28, with the Nifty trading at 18.9 times FY27E and 16.5 times FY28. Ghose expects meaningful earnings improvement from Q3FY27 onwards, contingent on crude staying subdued, monsoon normalising, and consumption recovering.
While benchmark indices such as the Sensex and Nifty posted modest gains this week, sectors including pharma, realty and automobiles led the rally as reported by CNBC-TV18. Kothari pointed to reasonable valuations in pockets of the market, particularly in banking and automobiles, while noting that growth expectations have risen significantly in capital goods. Year-to-date, 25 index components are in the red, while as many are in the green. Stocks such as Infosys, TCS, Wipro, and HCL Technologies have lost 34-38%, while ITC, HDFC Life Insurance, Jio Financial, HDFC Bank, Reliance Industries, Mahindra and Mahindra, and Maruti Suzuki have shed 15-29% year-to-date. On the positive side, stocks such as Adani Enterprises, Apollo Hospitals, Adani Ports, and Trent have jumped 15-35% this year so far. The India-UK FTA has changed the calculus for Indian textile exporters with most textile stocks either on the verge of a breakout or having already broken out of multi-month consolidation zones. According to JM Financial's Deepak Gupta, manufacturing-linked sectors including capital goods, infrastructure, and utilities are highlighted as promising, citing the government's push toward self-reliance amid ongoing global geopolitical instability. He remains bullish on healthcare, which benefits from rupee depreciation tailwinds and consistent, recession-resistant demand for pharmaceuticals and premium healthcare services. For IT stocks, the Nifty IT index is down approximately 30% year-to-date, driven by Gen AI disruption fears, macro uncertainty, and geopolitical risks, though AI could cause approximately 2-3% annual deflation in traditional IT services revenues over the next few years, but simultaneously create an incremental total addressable market of $300-400 billion by 2030.
Looking ahead, both fund managers believe investors should focus less on short-term market forecasts and more on identifying companies with durable business models and pricing power. According to Kothari's comments to CNBC-TV18, such businesses are 'better equipped to navigate changing economic cycles and commodity price volatility'. Thakurta recommends that investors should avoid relying on any short-term time frame to predict the recovery, as this often leads to missing a huge part of the recovery. For retail investors, Gupta recommends a three-month STP strategy for lump-sum deployment as a measured way to enter without market timing anxiety. Ghose advises that investors who stay focused on their long-term goals and remain invested in a well-diversified portfolio of quality companies are likely to benefit over time, with corporate earnings expected to improve, equities remain well-positioned for long-term growth despite near-term volatility concerns. The primary near-term risk to the outlook is the weak monsoon, which could impact rural incomes and inflation, though experts believe there are enough policy levers to counteract this challenge. According to JM Financial's analysis, lending financials are currently in a sweet spot, supported by stable asset quality and improving conditions, with FCNR deposit inflows expected to aid net interest margins by reducing regulatory cost burdens like CRR and SLR. Financials are described as being in a 'sweet spot' with stable asset quality and improving conditions, while non-lending financial businesses including asset management and broking continue to benefit from expanding capital markets.
