Mumbai, Jan 20 (NationPress) As we approach the Budget 2026-27, attention is set to pivot towards structural economic reforms. There appears to be limited scope for substantial tax concessions after last year's considerable hikes in tax brackets and adjustments to GST rates, according to a recent report released on Tuesday.

The Indian equity markets have largely remained stagnant, relinquishing many of their recent gains due to escalating global geopolitical tensions and ongoing uncertainties related to tariffs with the US.

Nevertheless, indicators of domestic demand and macroeconomic fundamentals exhibit resilience, bolstered by policy-driven tailwinds, as outlined in PL Capital's ‘India Strategy Report’.

The Nifty has lost most of the gains accrued over the past few months and has remained relatively flat.

Global geopolitical shifts are reshaping business landscapes, resulting in heightened uncertainty. Furthermore, the ongoing tariff disputes with the US are hampering market momentum.

Despite these challenges, the report highlights that the outlook for domestic demand and macro indicators continues to show significant traction into the third quarter and beyond, as the benefits from interest rate reductions, GST rationalization, income tax cuts, and low inflation begin to manifest in improved consumer sentiment and demand.

Amnish Aggarwal, Co-Head of Institutional Equities at PL Capital, stated, “We anticipate that economic momentum will be maintained as the advantages of robust tailwinds—including income tax rate reductions, a cumulative 125 basis point cut in the repo rate, favorable monsoons, historically low inflation, and GST adjustments—carry over into next year.”

Despite a cautious outlook for the short term, the Nifty EPS (earnings per share) is expected to grow at an impressive 14.8% CAGR over FY26–28. The brokerage estimates a valuation for the Nifty at a 3% discount to its 15-year average P/E, arriving at a revised 12-month target of 28,814, down from 29,094.

The brokerage has slightly adjusted its Nifty earnings forecasts for FY26, FY27, and FY28 by -2.6%, -2.4%, and +1.0%, respectively.

However, the brokerage remains cautious in the near term, predicting that large-cap stocks will continue to outperform, having delivered returns of 16–17% over the past year.

It expects domestically focused sectors such as banks, NBFCs, autos, select consumer staples, jewelry, defense, select durables, and metals to excel in the near to medium term.

“Consumer staples have witnessed a gradual increase in demand following inventory adjustments completed by mid-November. Rural demand is stable and is outpacing urban demand, while urban sentiment has shown consistent improvement in recent months, with expectations of further growth ahead,” the report concluded.