Nomura has reduced its March 2027 target for the Nifty 50 to 24,000, lowering its one-year forward valuation multiple to 17 times from 18.5 times earlier as global bond yields rise. The brokerage's new target is based on FY28 earnings per share of ₹1,410 and a 17-times forward earnings multiple, producing a target of 23,970 before rounding, implying a 7% potential return based on the level cited on October 1, 2026. Nomura stated that the latest decline in Indian equities has been driven by more than crude oil and geopolitical tensions, with the correction reflecting growing apprehension around long-term growth, rooted in geopolitical realignment and technological disruption.
According to Nomura, the correction reflects a different pattern across sectors compared to previous sell-offs. During the first phase, oil-sensitive and domestic-cycle segments such as oil marketing companies, banks, real estate and autos bore the brunt of the decline. In the second phase, information technology services fell the most, while non-banking finance companies and consumer staples also lagged despite solid first-quarter FY27 earnings. The brokerage noted that the AI investment narrative remained firmly intact during the second phase, reinforcing the relative attractiveness of the US market. Nomura also pointed to policy and regulatory risks in areas such as insurance and hospitals, adding to pressure on certain segments.
US 10-year and 30-year Treasury yields have risen 74 basis points and 65 basis points, respectively, over three months, moving above 5%. The India-US 10-year yield differential has narrowed to 190 basis points, its lowest level in 22 years. Nomura wrote that the rise in yields in developed markets is driven by strong growth and credit demand, rather than expectations of any long-term inflationary pressures. Foreign institutional investors have stepped up selling, with Nomura putting financial-year-to-date net outflows from Indian equities at $12.5 billion, with selling intensifying in September after relative stability during July and August. Healthcare was the only sector to escape the selling, according to the brokerage.
The Nifty 50 is trading at 16.9 times one-year forward earnings, marginally below its 17-22 times post-pandemic range and slightly below its pre-pandemic average. The Nifty Midcap index trades at 22.9 times one-year forward earnings against a post-pandemic average of 29.4 times, while the Nifty Smallcap index trades at 23.7 times, above its post-pandemic average of 22.9 times, with its 39.3% premium over the Nifty 50 the highest in more than a decade. Nomura noted that mid caps and small caps have been relatively more resilient, representing companies with low base that can adapt to changing dynamics quickly and record stronger growth versus large caps. Financials, information technology and consumption now trade below pre-pandemic multiples, while auto ancillaries, pharmaceuticals, real estate and defence/capital goods continue to trade at a premium.
Nomura remains positive on financials, information technology services, auto ancillaries, engineering and manufacturing, capital goods and pharmaceuticals, while taking a cautious view on consumption. The brokerage's valuation views show banks trading at 1.9x one-year forward price-to-book ratio, NBFCs at 2.5x, IT services at 14.5x earnings, and insurance companies at an all-time low 1.48x price-to-embedded-value ratio. Consumer staples trade at 31.7 times one-year forward earnings, consumer durables at 30 times, and consumer discretionary at 42.7 times. Nomura expects first-quarter FY27 earnings to remain resilient, with BSE 200-plus earnings to grow 8% for the remaining nine months of FY27, and 18% for FY28, though it sees greater margin pressure ahead as the WPI-CPI spread widens and commodity prices remain elevated.
