Bernstein expects India's equity market to remain relatively range-bound through the rest of 2026 as earnings upgrades become harder to achieve and a growing pipeline of IPOs could absorb liquidity from the secondary market.

India's corporate earnings season for the June quarter has provided a mixed picture for investors.

While large-cap companies delivered relatively strong earnings growth, weaker performance among some segments of the market and a tougher earnings base could limit the scope for significant upgrades in corporate profit expectations.

Global brokerage Bernstein has therefore maintained its year-end Nifty 50 target of 26,000, suggesting relatively limited upside from current market levels.

At the same time, a growing pipeline of initial public offerings (IPOs) could compete with listed equities for investor capital.

Bernstein Maintains 26,000 Nifty 50 Target

Bernstein has retained its Nifty 50 target at 26,000 for the end of 2026.

The brokerage's outlook suggests that the Indian equity market could remain relatively modest and range-bound rather than entering a broad-based rally.

Several factors are behind the cautious view.

These include:

• Limited scope for earnings upgrades

• Tougher earnings comparisons in the coming quarters

• High valuations in parts of the small- and mid-cap segment

• Uneven stock performance

• Increasing IPO activity

• Potential pressure on secondary-market liquidity

The combination means investors may need to focus more heavily on individual companies and sector-specific catalysts rather than expecting the entire market to rise together.

India Inc Earnings Show a Mixed Picture

The June-quarter results offered a mixed picture of corporate India.

Across the broader NSE200 universe, net profit growth slowed to around 8% year-on-year, compared with approximately 12.5% in the previous quarter.

However, the headline figure hides substantial differences between market segments.

Large-cap companies performed considerably better.

Nifty 50 companies recorded approximately 12.8% earnings growth, representing a significant improvement from the previous quarter.

Companies ranked between 101 and 200 in the NSE200 universe also delivered relatively resilient results, with earnings growth of around 8.1%.

The weakest performance came from the Nifty Next 50 segment.

Nifty Next 50 Earnings Decline

Aggregate earnings for the Nifty Next 50 declined by approximately 4% year-on-year during the June quarter.

This was the segment's weakest earnings performance since December 2024.

Several factors contributed to the decline, including weak results from state-owned oil marketing companies and softer earnings from selected banks and cement companies.

The performance highlights an important feature of the current market environment: earnings growth is not being distributed evenly across India's listed companies.

Excluding Oil Companies Changes the Earnings Picture

The underlying earnings numbers look considerably stronger if state-run oil marketing companies are excluded.

According to Bernstein's analysis, NSE200 earnings growth would rise to approximately 19% without OMCs.

Removing metals from the calculation as well would put earnings growth at around 15%.

However, Bernstein does not believe investors should simply remove weak-performing sectors to create a stronger headline number.

Oil marketing companies absorbed fuel-related losses as part of efforts to manage inflation.

Passing those costs directly to consumers could have affected consumption and economic growth.

Therefore, the weaker OMC earnings are also part of the broader economic picture.

Earnings Beats Remain Moderate

The June-quarter results did not produce an unusually high number of earnings surprises.

Approximately 42% of companies beat consensus estimates.

That compares with:

• 51.3% in the March quarter

• 32.6% in the December quarter

Around 26% of companies reported results broadly in line with analyst expectations, using a range of approximately plus or minus 4%.

This represented the highest proportion of in-line results in roughly two years.

The figures suggest that corporate earnings are becoming less supportive of widespread positive surprises.

Why Earnings Upgrades Could Become Difficult

One of Bernstein's main concerns is the limited room for further earnings upgrades.

Analysts reduced their FY27 earnings estimates for the NSE200 by approximately 1% during the June-quarter results season.

That was an improvement from the 2.2% reduction recorded during the previous quarter.

However, consensus still expects roughly 13% earnings growth for the full financial year.

Achieving that growth rate could become more difficult as comparisons become tougher from September onward.

Most of the earnings downgrades were completed by the end of July, while August showed a small positive revision trend of around 0.2%.

This leaves relatively little room for significant upgrades unless corporate performance accelerates.

Sector Growth Is Starting to Moderate

Several important sectors that previously supported earnings growth are showing signs of moderation.

Auto Sector

Vehicle volumes may struggle to maintain their earlier growth rates, potentially reducing the earnings momentum enjoyed by automobile companies.

Metals

Metal earnings are beginning to cool after a strong period of growth.

Cement

Cement companies are also experiencing slower momentum.

Power

The power sector has seen some moderation in earnings growth momentum as well.

The combination means that the market may not have a single dominant earnings engine capable of lifting the entire index.

Stock Selection Is Becoming More Important

The current environment is characterised by significant differences between individual stock performances.

Bernstein noted that the gap between the strongest and weakest-performing stocks exceeded 30% across every major NSE200 sector during the year.

Return dispersion was particularly high among large-cap and mid-cap stocks.

The coefficient of variation, a measure of return dispersion, moved above 50 for both segments.

This type of market environment can make stock selection increasingly important.

Instead of relying solely on broad market exposure, investors may need to identify companies with specific earnings, operational or business catalysts.

Bernstein Changes Its India Model Portfolio

Against this backdrop, Bernstein adjusted parts of its India model portfolio.

The changes were focused primarily on company-specific catalysts.

Eternal Added

Eternal was added to the portfolio based on expectations surrounding its quick-commerce business.

Bernstein highlighted stronger-than-expected EBITDA and order growth, while food-delivery performance remained relatively stable.

Paytm Added

One97 Communications, the company behind Paytm, was selected as another catalyst-driven opportunity.

The investment thesis centres partly on the possibility that changes in merchant discount rates could improve payment margins and earnings per share.

Adani Ports Re-entered

Adani Ports & SEZ was brought back into the model portfolio following a recent correction in its share price.

Bernstein pointed to the company's pricing power and expanding international port operations as supporting factors.

DMart Removed

Avenue Supermarts, which operates DMart, was removed after its recent stock outperformance.

Bernstein highlighted increasing competition from quick-commerce companies and elevated wholesale inflation as potential concerns.

Bernstein Retains Several High-Conviction Stocks

Despite changing some positions, Bernstein maintained several of its core high-conviction holdings.

These include:

• Larsen & Toubro

• NTPC

• Titan Company

• Power Finance Corporation

• Axis Bank

• HDFC Bank

• Home First Finance

• Nuvama Wealth Management

• Mahindra & Mahindra

• Zydus Lifesciences

The continued inclusion of these companies reflects Bernstein's preference for specific businesses and catalysts rather than a broad market-wide bullish position.

Rising IPO Supply Could Pressure Stock Market Liquidity

Another major issue for Indian investors is the increasing supply of new shares through IPOs.

India's primary market remains active, with companies seeking to raise capital and investors showing strong interest in new listings.

However, a surge in IPO issuance can have an unintended effect on the secondary market.

Investors have a limited pool of capital.

When substantial amounts of money move into new issues, less capital may remain available for existing listed companies.

This could put pressure on secondary-market liquidity and potentially limit overall market returns.

Why IPO Activity Matters for the Nifty

A strong IPO pipeline does not automatically mean that the stock market will fall.

However, large primary-market fundraising can change the flow of capital.

Investors may have to choose between:

Buying existing listed stocks

and

Participating in new IPO opportunities.

If IPO issuance remains elevated while earnings growth becomes less supportive, the secondary market could find it more difficult to generate broad-based returns.

This is one reason Bernstein expects market gains to remain relatively constrained.

Small and Mid-Cap Valuations Remain a Concern

Another factor investors need to watch is valuation.

While Nifty valuations have moderated to some extent, valuations across the small- and mid-cap segments have started moving higher again.

This creates a potentially difficult combination.

If earnings growth accelerates, higher valuations can sometimes be justified.

But if earnings upgrades remain limited, expensive stocks can become more vulnerable to corrections.

This does not mean that all small- and mid-cap companies are overvalued.

Rather, it suggests that investors may need to become more selective.

What Could Drive Indian Stocks Higher?

Despite Bernstein's cautious outlook, several factors could support the Indian equity market.

Potential positive catalysts include:

• Stronger-than-expected corporate earnings

• Improved consumption

• Lower inflation

• Increased private investment

• Strong domestic liquidity

• Better global economic conditions

• Continued earnings growth among large-cap companies

• Positive developments in interest rates

If corporate earnings outperform expectations, the market could potentially deliver stronger returns than the current base case.

What Could Keep the Market Under Pressure?

On the other hand, several risks could limit returns.

These include:

• Earnings downgrades

• High valuations

• Slowing sector growth

• Weak performance among selected market segments

• Large IPO fundraising

• Foreign investor outflows

• Global economic uncertainty

• Higher commodity prices

• Weakening corporate margins

The balance between these factors will determine whether the Nifty can move significantly beyond Bernstein's 26,000 target.

What Does Bernstein's Outlook Mean for Investors?

Bernstein's assessment does not necessarily represent a bearish view on Indian equities.

Instead, it points toward a market where stock selection could matter more than broad market direction.

Investors may need to pay closer attention to:

• Earnings growth

• Valuations

• Business fundamentals

• Sector trends

• Company-specific catalysts

• Cash flows

• Competitive advantages

In a low-return or range-bound market, identifying companies with strong individual growth drivers can become more important than simply relying on index momentum.

India Equity Market Outlook for the Rest of 2026

The remainder of 2026 could therefore be characterised by moderate market returns, uneven earnings growth and high stock-level dispersion.

Large-cap companies currently appear more resilient from an earnings perspective, while some mid-cap and smaller companies face greater valuation sensitivity.

At the same time, increasing IPO supply could compete with existing stocks for investor capital.

This creates a market where investors may need to be increasingly selective.

Key Takeaways

Bernstein's latest India market assessment highlights several important trends:

• The Nifty 50 year-end target remains at 26,000.

• Nifty 50 earnings grew approximately 12.8% in the June quarter.

• NSE200 earnings growth slowed to around 8%.

• Nifty Next 50 earnings declined approximately 4%.

• FY27 earnings growth expectations remain around 13%.

• Earnings upgrades may become more difficult because of tougher comparisons.

• Small- and mid-cap valuations are rising again.

• Stock-level performance remains highly dispersed.

• Increasing IPO supply could absorb secondary-market liquidity.

• Bernstein is emphasising company-specific catalysts through its model portfolio.

Conclusion

The Indian stock market enters the second half of 2026 with a more complicated earnings environment.

Corporate profits are still growing, but the pace is uneven. Large-cap companies are performing relatively well, while some other segments are facing pressure.

At the same time, rising valuations in parts of the small- and mid-cap universe and an expanding IPO pipeline could make it harder for the broader market to deliver strong gains.

Bernstein's decision to retain its 26,000 Nifty 50 target reflects this more measured outlook.

For investors, the message is clear: the next phase of the Indian equity market may be less about riding a broad market rally and more about identifying companies with sustainable earnings growth, attractive valuations and strong company-specific catalysts.

Frequently Asked Questions

What is Bernstein's Nifty 50 target for 2026?

Bernstein has retained its year-end 2026 Nifty 50 target at 26,000.

What happened to India Inc earnings in the June quarter?

NSE200 net profit growth slowed to around 8% year-on-year, while Nifty 50 earnings grew 12.8%.

Why could IPOs affect the stock market?

A large number of IPOs can absorb investor capital that might otherwise flow into existing listed stocks, potentially reducing liquidity in the secondary market.

Are small-cap and mid-cap stocks expensive?

Bernstein notes that valuations for small- and mid-cap stocks have started rising again. This can increase their sensitivity to earnings disappointments.

Which stocks did Bernstein add to its model portfolio?

The brokerage added Eternal and One97 Communications, while Adani Ports & SEZ re-entered the portfolio. Avenue Supermarts was removed.

What is Bernstein's overall India market outlook?

The brokerage expects a relatively modest and potentially range-bound market environment, with limited scope for broad earnings upgrades and greater importance placed on individual stock catalysts.

Disclaimer

This article is for informational and educational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security, or a guarantee of future market performance. Investors should conduct their own research and consult a qualified financial professional before making investment decisions.