New Delhi, Jan 17 (NationPress) A “Goldilocks” year is anticipated for India in 2026, as double-digit nominal growth, decreasing interest rates, a stable currency, and diminished global risks come together to create a promising environment for equity markets, particularly in sectors such as metals, BFSI, capital goods, and defence, according to a report released on Saturday.

The assessment from HDFC Securities indicates that 2026 is projected to yield a Nifty earnings growth of approximately 16% for FY27, setting a return expectation of around 11% and an end-of-year Nifty target of 28,720.

The RBI and government’s reflationary measures, which include rate cuts, CRR reductions, and liquidity injections, are anticipated to bolster domestic demand in 2026.

Anticipated easing of global trade uncertainties, including tariff reversals and a potential trade agreement between India and the US in early 2026, is also highlighted.

The report emphasizes that corrected valuations and historically low foreign portfolio investor positions create opportunities for upward movement, particularly through short covering, while retail participation, fueled by record SIP flows and the addition of demat accounts, remains a structural support.

In 2025, capital shifted towards North Asia, while India experienced ongoing FII outflows due to valuation concerns, presenting a possible reversal opportunity in 2026. The influence of AI continues to be a significant structural theme, contributing to capital expenditure, productivity improvements, and global investment flows.

The metals sector is expected to benefit from strong structural tailwinds driven by infrastructure initiatives, capacity expansions, and a global commodity upcycle.

Capital goods stocks may see advantages from a robust public capital expenditure cycle, although the report notes that earnings visibility is healthy, cautioning on valuations.

Moreover, an AI-driven recovery in IT is anticipated in the second half of 2026, alongside a gradual recovery in consumption, with premiumization bolstering margins.

However, the report points out several risks, including potential disappointment regarding elevated expectations from AI, which could lead to market volatility, although the long-term outlook for the investment cycle remains positive.

Additionally, high global debt levels pose risks of credit events and wider spreads, while a substantial IPO pipeline exceeding Rs 2.5 lakh crore may drain secondary market liquidity, according to the report.