Nifty 50 target at 26,000 for March 2026, says Emkay; adds Tata Steel, Wipro to model portfolio; exits BPCL, Dabur

The Indian stock market is poised for a strong rally, with small-caps and mid-cap stocks expected to see reversal of underperformance compared to large-caps, suggesting a broad-based market strength, according to Emkay Global Financial Services.

The brokerage firm has reaffirmed its bullish outlook on Indian equities, maintaining a Nifty 50 target of 26,000 for March 2026, citing a combination of improving global cues, accommodative domestic policies, and bottoming-out earnings estimates as key factors supporting its positive stance.

One of the pivotal global developments boosting sentiment is the recent 90-day pause on US tariffs. Emkay believes this move significantly reduces the risk of a deep recession in the US and lessens the potential for financial market disruption. The brokerage also foresees a rebound in commodity prices and a wave of bilateral trade agreements that could buffer global economic momentum from geopolitical uncertainties.

Domestic Tailwinds: RBI’s Supportive Stance and Sectoral Drivers

On the domestic front, the Reserve Bank of India’s (RBI) dovish tone is expected to provide a boost to consumption recovery, even as government capital expenditure might slow. Emkay anticipates the power sector to emerge as a key growth driver.

Additionally, a soft landing in the US economy is expected to benefit India's technology sector, supporting both employment and discretionary spending.

Emkay continues to project a FY26 Nifty EPS of ₹1,156, suggesting stable earnings trajectory in the medium term.

Mixed Q4 Results 2025, But Green Shoots Emerge

The Q4 results season for FY25 is expected to present a mixed picture. Topline growth for Emkay’s coverage universe stood at a modest 2.1% year-on-year (YoY), while profit after tax (PAT) declined by 7.2% — dragged down by margin pressures and a high base in the Energy segment.

However, when Energy and a few outliers are excluded, the picture improves: revenues grew 7.5% and PAT increased 10.8% YoY. Margins (Nifty ex-BFSI) are expected to improve by 71 basis points to 20.1%, led by Telecom, Healthcare, and Materials. On the other hand, Consumer Discretionary and Energy are likely to post a weak quarter.

Valuations and Market Rotation: A Case for Broad-Based Rally

One of the most compelling factors supporting Emkay’s optimism is the recent correction in valuations. The median price-to-earnings ratio of the BSE 500 has dropped 21% over the past six months. With earnings stabilizing, Emkay sees scope for a stock market rally and anticipates a reversal of underperformance in Smallcap and Midcap (SMID) stocks relative to large-caps — setting the stage for a more broad-based market uptrend.

Portfolio Strategy: Bullish on Technology, Materials; Exit FMCG

Reflecting the shift in market dynamics, Emkay Global has made significant changes to its model portfolio. The firm has turned overweight (OW) on Technology, viewing the recent correction as a buying opportunity. Materials has also been upgraded to OW, driven by expectations of a commodity price rebound. Tata Steel has been added to capture this thematic play.

Consumer Discretionary, including the auto sector, remains Emkay’s highest conviction overweight. However, the firm has made a bold move by exiting FMCG entirely, citing structural headwinds and a potential derating in a high-beta market environment. Financials remain underweight (UW), as the firm continues to see valuations as stretched relative to growth expectations.

New additions to the Emkay Global’s model portfolio include Tata Steel and Wipro, while National Aluminium, Bharat Petroleum Corporation Ltd (BPCL), Dabur India, and Godrej Consumer Products have been dropped.

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