Bernstein Sees Nifty at 26,500 by Year-End as Downgrade Cycle Nears End
Bernstein has projected the Nifty 50 index to reach 26,500 by December 2025, citing a reversal in the trend of earnings downgrades that began in September 2023. While it acknowledges the absence of exceptional earnings, the brokerage believes India has successfully avoided the worst-case scenarios that were once anticipated.
- The recent Q4 earnings season indicates growing resilience in corporate performance.
- A decline in downgrades marks a shift from the cautious sentiment that dominated past quarters.
Q4 Earnings Show Signs of Stability
According to Bernstein, 51% of NSE100 firms reporting Q4 results have beaten earnings estimates by over 4%, the highest proportion since June 2023. The share of companies missing expectations is also at a 14-quarter low of 19%, underscoring improved earnings predictability.
- In contrast, the past five quarters saw less than 40% of companies beating estimates.
- The steady beat-to-miss ratio signals that India may have entered a more stable earnings environment.
Despite a modest dip in overall earnings growth — down to 10% from 11% in Q3 FY25 — the current performance is being interpreted as resilient, especially in the context of lower macro and sector-specific risks.
- This trend reflects broad-based recovery without reliance on outliers.
- The positive surprises come amid tempered expectations and cautious consensus estimates.
No Upgrades Yet, But the Worst Is Over
Bernstein maintains that while the earnings upgrade cycle hasn’t yet started, the era of persistent downgrades appears to be behind us. The lack of further cuts to consensus projections during earnings season reflects growing earnings stability.
- A bottom-up analysis of NSE200 mirrors similar patterns in earnings consistency.
- The brokerage highlights sector-level resilience despite some pockets of weakness.
Interestingly, earnings projections for FY26 and FY27 are largely intact, suggesting that markets have already priced in recovery. Bernstein is therefore not building room for additional upgrades in its current Nifty target.
- Expectations are anchored in future margin recovery, rather than top-line acceleration.
- Profit growth is outpacing revenue growth, pointing to improved operational leverage.
Market Support from Domestic Macros
Bernstein believes India’s macro environment remains robust, supported by factors such as better government capex, resilient rural demand, lower interest rates, and tax cuts, all contributing to reduced earnings risk.
- These macro tailwinds offer a cushion against global volatility.
- Liquidity conditions and government spending are seen as growth enablers for FY26.
While Bernstein expects volatility to persist, it advises investors to focus on bottom-up stock picking rather than relying solely on index-level gains.
- The brokerage does not anticipate a linear rise in the Nifty.
- Strategic allocation in well-positioned sectors is recommended to capture alpha opportunities.
Sentiment Rebounds After Geopolitical Calm
With Nifty nearing 25,000, the Indian equity market appears to be regaining momentum following the India-Pakistan ceasefire over the weekend. The event-driven correction now looks temporary, and attention is shifting back to corporate fundamentals.
- Bernstein’s upgrade in January was driven by expectations of macro stabilization and limited global headwinds.
- The market’s bounce reflects renewed investor confidence in domestic growth narratives.
Bottom Line: Stability Over Surprises
Bernstein’s forecast of Nifty at 26,500 by year-end is based on an improving earnings landscape, resilient macroeconomic indicators, and the gradual return of margin expansion. While it stops short of calling an upgrade cycle, the data points to a period of recovery and consolidation — offering a favorable environment for selective, fundamentals-driven investing.