Nifty target at 26,200 as BofA tweaks India strategy; upgrades hospitals, telecom, downgrades two-wheelers

Detailed summary

BofA Securities maintained its year-end Nifty target of 26,200, citing improving earnings and easing market risks. It favors large-cap stocks over small- and mid-caps, while warning that volatility, a weak monsoon and fiscal pressures could pose risks.

Bank of America (BofA) Securities has retained its year-end Nifty target of 26,200, indicating a further upside potential of 4.7% from current levels, as it sees India's equity market risks gradually receding and corporate earnings showing signs of recovery.

In its latest India strategy report, the brokerage said most of the major uncertainties that had weighed on markets are now better understood and largely factored into valuations. These include elevated crude oil and commodity prices, a weaker monsoon, rupee depreciation, potential interest rate hikes by the US Federal Reserve and the Reserve Bank of India, and large fundraising activity.

BofA turned constructive on Indian equities in September 2026 after maintaining a bearish stance on the Nifty since August 2024. The brokerage believes the recent market rally has room to extend, although it expects volatility amid geopolitical developments, US Federal Reserve decisions and emerging concerns around El Niño and the Eighth Pay Commission.

It also reiterated its preference for large-cap stocks over small- and mid-cap stocks, citing relatively stronger earnings revisions and concerns around valuations, leverage and the potential impact of weather-related risks.

BofA believes Indian equities can extend their recent gains as earnings momentum improves and valuation concerns become less restrictive.

The brokerage noted that the Nifty has outperformed small- and mid-cap stocks as well as large emerging markets over the past two months. It expects this trend to continue, supported by improving earnings visibility and the moderation of several macroeconomic risks.

According to BofA, the Nifty is currently trading at around 18.3 times earnings, close to its long-term average. The brokerage believes there is room for valuation multiples to expand as corporate earnings recover.

Earnings growth has also started to improve. BofA highlighted that earnings growth picked up to around 13–18% in the first half of FY27, compared with…

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