Kolkata: The Indian equity markets are again marching back towards their peak. Sensex and Nifty are again inching close to the highs after a long gap of more than a year amid valuation concerns, trade-related uncertainties, geopolitical nest and a weak rupee. One of the significant developments of November is that three major global brokerages such as Goldman Sachs, Morgan Stanley and HSBC have published bullish reports which project Sensex 30 to sail past the psychological 1 akh mark next year and by December 2026 rise as high as 107,000. What are the tailwinds that are triggering such a bullish outlook of the major brokerages. let’s have a look and try to analyse the factors.
“After underperforming Asia by 30% in the past 12 months, we think the worst is over for Indian equities…. Following their worst underperformance in three decades, we see Indian equities regaining their mojo in 2026,” HSBC mentioned in its note on India.
The policy support
Favourable policies seem to have been the biggest factor in the change of outlook. Fiscal and monetary authorities have supported every move to achieve growth in GSP. The Centre has cut GST to revive consumption and the RBI has one its bit by reducing the Repo Rate by 100 basis points in 2025. The central bank has injected liquidity and income tax cuts have helped consumption by putting significant amount of additional cash in the pockets of the salaried class.
Earnings downgrade cycle over
Major brokerages are more or less unanimous in their view that the earnings downgrade cycle is over. The Q2FY26 performance of many companies have helped to clear the air of gloom. This will help create a foundation for the leap necessary to the next level, feel analysts. Goldman Sachs highlighted that MSCI India EPS revisions are “starting to see upgrades in select pockets.” “We think the year-long earnings downgrade cycle, which was a primary reason for lowering our Indian equity market view last year, has bottomed out and will see recovery as we head into next year,” Goldman Sachs mentioned in their note.
FIIs are returning
Though FIIs are no longer the sole determinant of the Indian equity markets, they still help set the mood significantly. While they began selling India equities since late last year, they have started coming back, helped partly by the Q2 results. FIIs have sold about $30 billion of Indian equities and analysts said they moved significantly to Korea and Taiwan. But now that flow is gradually turning and the change in brokerage outlook is a sing of that.
The domestic investors
Gone are the days when the FIIs flows would set the entire mood of the Indian market. The domestics investors have emerged extremely strong over the past few years. Morgan Stanley has highlighted the structural factors that have helped this change. The change is to be found in corporate deleveraging and digital deepening. More and more household savings are now funnelled into equities and mutual funds. The mutual fund industry is pumping in excess of Rs 1,000 crore every day in the market.