JP Morgan Forecasts Nifty 50 to Reach 30,000 by 2026: Impact of Rate Cuts and Tax Breaks on Indian Markets

India's benchmark Nifty 50 index could reach 30,000 by the end of 2026, representing approximately 15% upside from current levels, according to JP Morgan's Wednesday report. This growth is expected to be driven by consistent fiscal and monetary policies that should stimulate demand.

The Nifty and its counterpart Sensex currently stand at 26,205.3 and 85,609.51 respectively, just marginally below the record highs achieved in September 2024. This strength reflects improving earnings against a backdrop of steady economic growth, controlled inflation, and strong domestic investment flows.

A Reuters survey of economists projects the Nifty to reach 28,500 by the conclusion of 2026 and further rise to 28,850 by mid-2027.

While the Nifty has advanced nearly 11% this year, it still underperforms compared to Asian and emerging market peers, representing a period of relative weakness for India following over a year of subdued earnings and persistent foreign investor outflows.

JP Morgan analysts Rajiv Batra and Rushit Mehta note that although market valuations maintain a premium over other emerging markets, they have moderated below their long-term average after 14 consecutive months of underperformance.

The recent decline in inflation due to tax cuts and significant interest rate reductions by the central bank are anticipated to enhance domestic demand substantially.

The brokerage anticipates that the Reserve Bank of India will implement an additional 25 basis point rate reduction in December, further amplifying the effects of tax cuts that are already boosting consumption, credit expansion, and automotive sales.

JP Morgan maintains its preference for domestically-focused sectors over export-oriented ones, suggesting that a potential US-India trade agreement could trigger a near-term market revaluation.

With India increasing petroleum imports from the United States while reducing crude purchases from Russia, the analysts believe "the probability of resolution of penal US tariffs of India" is very high, with the likelihood of removing the additional 25% levy.

Such developments would strengthen investor confidence, attract foreign capital inflows, stabilize the rupee, and support a recovery in IT and pharmaceutical stocks.

The brokerage maintains an "overweight" position on materials, financials, consumer sectors, hospitals, real estate, defense, and power, while holding an "underweight" stance on IT and pharmaceuticals.