Handily almost 28,000 in February 2027? Prabhudas Lilladher says the current consolidation sets the stage for the next rally

Prabhudas Lilladher has said the country’s growth story is entering a decisive phase, driven by policy clarity, landmark trade deals and a sustained boost to infrastructure. It set a 12-month target of nearly 28,000 for the Nifty 50, citing several reasons.The domestic brokerage, in its latest India Strategy Report, said the prolonged phase of consolidation in Indian equity markets appears to be setting the stage for renewed optimism as structural factors remain firm despite recent earnings recalibrations.

Benchmark index Nifty 50 has been trading within a narrow range of 5-6% over the past nine months. This reflects a period of adjustment amid global geopolitical uncertainties, Trump’s tariff flip-flops and 9-9.5% earnings per share (EPS) moderation for FY26 and FY27, PL Capital said.

‘First signs of revival are visible’

However, the brokerage emphasized that early signs of an upturn are visible. “Business performance has remained resilient, with revenue, EBITDA and profit after tax for the coverage universe growing 9.9%, 16.4% and 16.7% year-on-year respectively, even as EPS estimates were lowered. While FY26 EPS growth is expected at a measured 3.8%, the medium-term earnings trajectory remains strong, with an estimated CAGR of 16.3% over FY26-28, indicating that the current phase is more of a reset than a reversal,” the report said.

PL Capital sees Nifty currently trading at 19.1x one-year forward earnings, broadly in line with the 15-year average.

Useful targets

Talking about the 12-month Nifty 50 target of 27,958 in the base case, the report states that this target assumes an index trading at 18.3x, which reflects a 5% discount to long-term averages, based on December 2027 EPS of 1,525. The base case of 27,958 implies an upside potential of almost 10% from the benchmark index’s previous closing level of 25,424.65. Meanwhile, in a bullish scenario, PL Capital sees the Nifty 50 trading at a 20x multiple and rising to 30,497. This represents an upside potential of almost 20% from current levels. On the other hand, it sees Nifty 50 trading at 26,486 in a conservative bear case scenario.“A decisive catalyst for the next growth cycle will be India’s accelerated progress in trade diplomacy,” the brokerage said, adding that the recently concluded Free Trade Agreement (FTA) between India and the EU marks a “historic breakthrough”.

Which sectors will benefit from the India-EU trade deal?

Labor-intensive sectors such as textiles and clothing, marine products, leather and footwear, gemstones and jewelry, chemicals, machinery and electrical equipment will benefit significantly from the trade deal, PL Capital said.

It also explained that the services component of the agreement opens new frontiers, beyond goods trade. “IT and ITeS companies will gain improved market access and clarity on visas, while financial services, professional services, telecom, education and digital commerce will benefit from regulatory alignment and cooperation frameworks. Importantly, collaboration in advanced semiconductors, chip design and critical industrial electronics will strengthen India’s manufacturing ambitions,” the report said.

‘Indian stocks enter a multi-year compound cycle’

India is transitioning from a cyclical recovery phase to a structurally stronger growth trajectory, says Amnish Aggarwal, Director Research, Institutional Equities, PL Capital. “What sets this cycle apart is the depth of policy implementation, increasing private sector participation and the scale of opportunities emerging in manufacturing, digital infrastructure and domestic consumption. Markets may have stalled, but the underlying economic engine continues to gain momentum,” he added.

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Aggarwal added that Indian stocks are entering the early stages of a “multi-year compound cycle.”

The India-US interim trade framework, which effectively reduced tariffs on Indian exports to the US from 50% to 18%, has also removed a significant overhang for exporters. “The recalibration reduces uncertainty in sectors such as gems and jewelry, textiles, aircraft parts, auto parts and select industrial goods,” the brokerage said.

These two trade breakthroughs complement the government’s domestic growth agenda, according to PL Capital.

Which sectors will benefit from the Union Budget 2026?

It added that the Budget 2026-2027, which was presented by Finance Minister Nirmala Sitharaman earlier last month, continued to prioritize capital expenditure.

“Strategic areas include defense manufacturing, data centres, renewable energy, high-speed rail corridors, semiconductor manufacturing, electronic components under the PLI framework, aerospace and specialty chemicals. Duty exemptions on aircraft components and extended incentives for data centers signal India’s intention to position itself as a global hub for manufacturing and digital infrastructure,” it added.

According to PL Capital, banks and diversified financial institutions are positioned to benefit from the normalization of credit growth to 13-14% and stable asset quality. It added that capital goods and engineering companies are likely to ride the infrastructure and defense wave. “Consumer demand is gradually reviving due to VAT rationalization, lower inflation and tariff easing, while healthcare continues to deliver structural growth supported by domestic and specialty segments,” the report said.

In conclusion, PL Capital’s strategy remains constructive on banking, diversified financials, healthcare, consumer goods, automotive and capital goods/defense, with a relatively cautious stance on IT services and commodities.

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Over the next five to 10 years, the domestic real estate industry sees asset creation and technology-led industries as driving India’s next phase of expansion. “Improved global market access, lower tariff barriers and stronger supply chain integration should boost both export competitiveness and domestic manufacturing capabilities. While near-term risks such as global interest rate movements, climate changes and technology-driven employment shifts warrant monitoring, the structural trajectory remains favorable. As trade corridors reopen, policy support strengthens and earnings momentum gradually rebuilds, India is on the cusp of a new growth cycle,” the report concluded.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)