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The Nifty 50 index is expected to have an upside of 8 per cent to touch the 26000 target over the next one year, according to a report by UBS.
The report also maintained positive stance on consumption-oriented sectors, including retail, staples, two-wheelers (2Ws), and travel. It also maintains a constructive view on financials, real estate, cement, and hospitals. It said "Expect 8 per cent upside in NIFTY 50 Bottom-up analysis suggests 8% upside in the NIFTY 50 to a one-year target of 26,000. We are positive on most consumption-oriented sectors spanning retail, staples, two wheelers (2Ws) and travel. We are also positive on financials, real estate, cement and hospitals". The firm, however, is less optimistic about industrials and infrastructure sectors. It expects government capital expenditure (capex) growth to slow to a mid-to-high single-digit CAGR over FY25-27 due to several factors. These include the fiscal strain from eighth pay commission payouts, state governments' combined fiscal deficit hovering around 3 per cent, and ongoing social welfare spending limiting room for additional capex. Private sector investments could also face pressure amid global growth uncertainties. While cautious on industrials broadly, UBS highlighted that its industrials team is constructive on defence and the power equipment value chain. The report remained cautious on the IT sector as well, citing potential earnings risks due to high exposure to the US and concerns about a global slowdown. However, it noted that its IT team remains positive on the sector under coverage, believing that downside risks to current valuations are limited. It said "We highlight the UBS Industrials team is constructive on defence and the power equipment value chain. We are cautious on the IT sector due to potential earning risk given high exposure to the US and concerns on global growth slowdown". The report also flagged concerns about generic pharmaceutical export companies, expecting earnings downgrades to begin from the second half of FY26. On the macro front, the UBS Economics team has revised its India GDP growth estimates downward, trimming FY26 projections by 30 basis points to 6 per cent and FY27 forecasts by 20 basis points to 6.4 per cent, factoring in the possibility of a global slowdown. However, the impact may be partially offset by lower crude prices and potential consumption stimulus benefits. The report believes that financials, staples, retail, two-wheelers, cement, and travel sectors are likely to outperform going forward. However, if global growth weakens significantly, the Nifty 50 could see a downside of up to 6 per cent, as consensus earnings growth estimates for FY26 could fall from 13 per cent to 8 per cent. (ANI)
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