The earnings growth is anticipated to be over 17% for 2027, with improved macro situation, policy decision and stimulus expected to drive the gains next year.
The brokerage said Indian equities saw a 17% drawdown from September 2024 highs but the Nifty 50 rebounded to a new all-time high by end of calendar 2025. However, mid-caps and small-caps lagged.
“Clearly, it means that finally it is the fundamentals…and earnings growth which play and not necessarily the narrative and the themes and frenzy,” said Shripal Shah, managing director and CEO of Kotak Securities.
From a FII perspective, the Indian markets had run ahead of its time in terms of valuation that prompted them to invest in Asean peers where there was still value left, Shah said.
Given the earnings growth that is expected, foreign investors could turn positive somewhere in the coming year once they find value in the market, he added.
The bull case scenario is close to 32,032 levels, but it’s not the target that the brokerage is projecting as it depends majorly on a turnaround in foreign flows. “For that, we need FIIs to turn bullish on the market and for that, the government will have to take a lot of steps on the manufacturing side,” said Shrikant Chouhan, head of research at Kotak Securities.
The brokerage prefers BFSI, technology, healthcare and hospitality sectors.
Kotak said gold could continue shining amid macro uncertainty and rising interest rate cut bets. Silver prices are expected to remain fundamentally strong, with a broad range between $48 and $70 per ounce and potential spikes toward $75 under conditions of aggressive monetary easing or stronger-than-expected industrial consumption, it said.