Nifty earnings may see further cuts in first half of FY26 due to uncertainty by tariff wars: Report

The report has further lowered the targets after cutting Nifty's expected earnings per share (EPS) for FY26 and FY27 by 6.2 per cent and 5.6 per cent respectively since October 2024.

It stated, "NIFTY EPS has seen a cut in EPS by 6.2% and 5.6% for FY26/27 since Oct 24, and tariff wars and the uncertain environment can result in further cuts in 1H26."

The report now values the Nifty at a 7.5 per cent discount to its 15-year average price-to-earnings (PE) ratio of 18.9 times. Based on an expected EPS of Rs 1,460 for March 2027, it has set a 12-month target for the Nifty at 25,521, slightly lower than its earlier target of 25,689.

Nifty's EPS estimates for FY25, FY26, and FY27 now stand at Rs 1,150, Rs 1,286, and Rs 1,460. These represent changes of 0.5 per cent, -1.5 per cent, and -0.9 per cent compared to earlier forecasts.

The expected earnings growth for the Nifty over FY25 to FY27 is now 12.7 per cent annually, down from 13.3 per cent earlier. The estimates are also lower than market consensus by 1.7 per cent for FY25, 3.5 per cent for FY26, and 4.5 per cent for FY27.

The report also outlined three possible scenarios. In the base case, with a PE of 17.5 times, the Nifty could reach 25,521 in the next 12 months.

In the bull case, if valuations return to the long-term average of 18.9 times, the Nifty could rise to 27,590.

In the bear case, if the index trades at a 10 per cent discount, it could drop to 24,831.

The report also stated that in the near term, sectors focused on the domestic market are likely to perform better. These include hospitals, domestic pharma, retail, select consumer staples, banks, defense, and power.