Mumbai, December 11 (NationPress) The Nifty index is anticipated to reach 29,000 next year, bolstered by a revival in discretionary spending during the latter half of the current fiscal year (FY26), along with supportive liquidity measures from the Reserve Bank of India, according to a report released on Thursday.

The analysis from Emkay Global Financial Services indicates that a mixed capital expenditure cycle and optimism surrounding a potential India-US trade agreement are additional factors contributing to this projection.

Furthermore, the firm noted that GST reforms and structural enhancements to affordability are expected to rejuvenate consumption and facilitate a medium-term growth trajectory.

Emkay maintains a positive outlook on sectors such as discretionary spending, industrials, healthcare, and materials, while being cautious on financials, staples, IT, and telecom.

The report emphasizes, "A more accommodating rate environment coupled with stable policy guidance creates an advantageous scenario for India’s medium-term growth trajectory."

Healthy rainfall is also expected to boost income and consumption recovery, complemented by potential tax reductions in the FY26 Union Budget.

“India’s medium-term forecast remains impressively resilient. Even amidst short-term fluctuations, the combination of lower rates, increasing consumption, and stable policy direction lays a robust foundation for the nation's multi-year growth cycle, setting the stage for substantial gains in the Nifty through 2026,” stated Nirav Sheth, CEO of Institutional Equities at Emkay Global.

The 2026 forecast takes into account the Reserve Bank of India’s liquidity measures, which are projected to lower borrowing costs and enhance credit flow, particularly benefiting retail-focused lenders and NBFCs.

While corporate capital expenditure is on the moderate side, government spending in sectors like railways, defense, and power continues to offer visibility.

The report pointed out that while large-cap stocks offer protection in volatile markets, small and mid-cap stocks are likely to deliver higher returns.

“In contrast to the Nifty, which is heavily weighted towards low P/E sectors like financials and energy, the small and mid-cap universe is more aligned with high-growth companies that naturally command higher valuations,” remarked Seshadri Sen, Head of Research and Strategist at Emkay Global.

Despite foreign portfolio investors (FPIs) being net sellers, with an outflow of ₹271 billion year-to-date, domestic mutual fund inflows remain strong. The primary market remains active, with total issuances reaching ₹1,769 billion thus far this year.