BSE, NSE Listed Shares Set For Better 2026 On Earnings, Domestic Flows: Jefferies Report

India's equity market is set to be positioned better in the emerging market category next year with expectations of recovery in corporate earnings and supportive macro trends, as per a Jefferies report. 

It set a 2026 year-end target of 28,300 for the broader benchmark Nifty 50, implying about 10% upside from current levels and aligning with bullish views from HSBC, Citi, Nomura, PL Capital, Kotak Securities and Emkay Global.

The Nifty has risen 9.5% in 2025 so far, lagging Asian and broader EM peers on the back of subdued earnings over the last six quarters, record foreign outflows, higher US tariffs and elevated valuations.

In November, Nifty and Sensex reclaimed record highs post a 14-month period triggered by better Q3 earnings, a resilient Indian econmy, capital infliows and next-gen fiscal and monetary policies in place. 

A pertinent reason behind the market holding up better next year would. be consistent domestic inflows, the brokerage firm noted. 

Monthly inflows from mutual funds, systematic investment plans, insurers, pensions, provident funds, alternative investment funds and direct equity have averaged $7 billion–$8 billion.

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These flows can help limit the downside from net foreign selling - that is around $18 billion in 2025 so far - and deep corrections, while a robust $7 billion-$8 billion in fresh equity supply each month keeps the upside in check.

Jefferies expects the rupee, which has already weakened about 5% in 2025 to record lows, to hold roughly around 90 rupees per U.S. dollar over the next six to 12 months.

A low current account deficit and relatively stronger capital inflows should keep the balance of payments positive, helping stabilise the currency, said Jefferies, adding that the worst of the pressure for the rupee is over.

On sector positioning, Jefferies is positioned "overweight" lenders, autos, cement, hospitality, telecom and property. Meanwhile, it is "underweight" staples, IT, industrials and pharma, and "neutral" on energy.

It projects MSCI India earnings-per-share growth to accelerate from about 8%-9% in the financial year 2025/26 to 13%-14% in 2026/27, driven mainly by banks, autos and power.

Private lender Axis Bank, telecom company Bharti Airtel and auto makers Mahindra & Mahindra and TVS Motor are among Jefferies' top 10 picks for 2026.