Nifty Expected to Hit New Record High by FY26-End: Pranab Uniyal
Largecap stocks, infrastructure, real estate, and domestic economy sectors are seen as key drivers, supported by earnings growth forecasts and strong domestic policies.
NiftyLarge CapsReal EstateInfrastructureEarnings GrowthReal EstateAug 31, 2025
In the last 6-9 months, HDFC Tru strongly urged clients to shift away from mid/small caps to large caps due to valuation concerns. They also advised focusing on domestic economy-facing sectors like BFSI, infrastructure, insurance, and capital markets, while being underweight on IT and staples. These strategies have benefitted clients, and the overall bias towards domestic economy-facing sectors remains. They are selectively beginning to see opportunities in the mid/small cap space as well.
Policies have increasingly focused on supporting growth in the past 12 months, with income tax cuts, rate cuts, and GST rationalization. These measures will boost growth over an extended period. The Pay Commission could be a significant theme in CY26.
Market returns are inherently lumpy rather than linear. Periods of high returns will alternate with periods of moderate returns, and timing these cycles is difficult and often not worth attempting. Investors who try to time the market may miss out on large rallies and could face higher costs in the long term.
Expensive valuations and low earnings growth were themes in FY25, but the market is currently fairly valued. HDFC Tru expects Nifty to rise by 10%, with a strong probability of hitting a new high by the end of the fiscal year.
Foreign Institutional Investor (FII) selling has created pressure on Indian equities, but Domestic Institutional Investors (DIIs) have been net buyers in 6 out of the 8 months in CY2025, including August, with net purchases of Rs. 76,000 crore. DII buying has far outstripped FII selling. The growth outlook at the aggregate level is expected to improve, with earnings in heavy-weight sectors like BFSI, IT, and consumption almost bottoming out and likely to improve from H2FY26. For HDFC Securities’ institutional equities coverage universe, projected earnings growth for FY26E and FY27E stands at 11.7% and 16.4%.
HDFC Tru's preferred sectors are large banks, auto, consumer discretionary, real estate, cement, and capital goods. These sectors are expected to see strong earnings growth due to strong domestic fundamentals. They remain underweight on oil & gas, mid-cap IT, small banks, and metals.
High-net-worth individuals (HNIs) are showing increased interest in newer assets like Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to earn high yields in a declining interest rate environment. HDFC Tru is positive on both asset classes. Distribution yields of around 6% for REITs and 9-11% for InvITs provide strong cases for allocation to these asset classes and offer downside protection to total returns. Further declines in long-term bond yields will also support these asset classes.
Investors should note that unit prices of InvITs and REITs have exhibited higher volatility than the NAV of the units or distribution of cash flows. A contrarian approach is recommended for InvITs, where investors should buy if unit prices fall significantly below NAV and book profits when unit prices rise well above NAVs. In REITs, total returns will align with the commercial real estate outlook. Currently, office space absorption is likely to outstrip supply over the next 2-3 years, which could boost returns for REITs.
If you had Rs 10 lakh to invest in the market right now, HDFC Tru recommends a 50% equity allocation with 45% in debt for a moderate risk-profile investor. Gold and silver have rallied sharply in 2025, and there could be near-term volatility. Hence, they recommend a 5% allocation to gold and silver, which could increase to 10% over the next 2-3 years. For aggressive investors, equity allocation could be 65-70%.
The one contrarian idea HDFC Tru backs for the next 12 months is the preference for large cap stocks over mid/small caps. While many investors agree with the hypothesis, they often lean towards small caps at the stock level. The bias is so strong that suggesting large caps feels like a contrarian idea. HDFC Tru remains positive on the infrastructure and real estate sectors, which could rebound. Investors could also selectively bet on high-quality small/mid cap ideas where valuations may have reached attractive levels.
Frequently Asked Questions
What is HDFC Tru's stance on mid and small caps?
HDFC Tru recommends shifting away from mid and small caps to large caps due to valuation concerns. However, they are beginning to see opportunities in the mid/small cap space as well.
What policies have supported growth in the past year?
Policies that have supported growth include income tax cuts, rate cuts, and GST rationalization. These measures are expected to boost growth over an extended period.
What is the expected earnings growth for FY26E and FY27E?
Projecting earnings growth for HDFC Securities’ institutional equities coverage universe stands at 11.7% for FY26E and 16.4% for FY27E.
Which sectors does HDFC Tru prefer for the next leg of market growth?
HDFC Tru's preferred sectors are large banks, auto, consumer discretionary, real estate, cement, and capital goods.
What is HDFC Tru's recommendation for REITs and InvITs?
HDFC Tru is positive on both REITs and InvITs due to their high distribution yields. They recommend a contrarian approach for InvITs and note that total returns for REITs will align with the commercial real estate outlook.
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