UBS Wealth Management Chief Investment Officer Hartmut Issel has made a bold prediction for Indian equity markets, forecasting that the Nifty could reach the significant milestone of 30,000 by the end of 2026. This projection represents approximately 10% growth for the calendar year and marks a notably optimistic outlook for India's benchmark index.

Earnings Acceleration Expected to Drive Growth

Issel's forecast is anchored on expectations of sustained earnings momentum in Indian markets. The CIO anticipates India's stock market will experience a second consecutive year of earnings acceleration, with fiscal year 27 performance potentially surpassing current year results.

"We don't expect many markets where we see an uptick in earnings the second year probably in a row," Issel explained. "In India's case... we're quite convinced the fiscal year 27 earnings uplift will be even higher than it was in the current year."

Corporate Earnings as Primary Market Driver

The UBS executive believes corporate earnings will serve as the main catalyst for reaching this milestone, potentially overshadowing other market concerns. Issel suggests that strong earnings performance could outweigh uncertainties related to global trade negotiations and valuation challenges that have previously weighed on market sentiment.

"If I look at the end of that calendar year, we should be up I think... slightly above, actually, 10%, so you know close to 30,000 on the Nifty. This is I think a very fair assumption," Issel stated.

Trade Deal Impact Downplayed

Despite ongoing concerns about India's trade relationship with the US, Issel has downplayed the potential market impact of trade deal uncertainties. He noted that major sectors including pharmaceuticals and information technology are already exempt from Trump tariffs, limiting the overall market exposure to trade-related risks.

"Investors have never really looked at it so much from the equity side in the first place," Issel commented regarding trade deal negotiations. "When it hasn't had a negative impact really on the stock market in the first place, then sort of coming to a negotiation... should also not by itself pull up the index either."

Sector-Specific Investment Focus

UBS is concentrating on sector fundamentals rather than macro-level trade concerns. The investment house has identified specific opportunities across different market segments based on current valuations and growth prospects.

Key Sector Highlights:

• Financials: Attractive due to favorable current valuations
• Consumption: Positioned to benefit from falling inflation trends
• Affordability Factor: Expected to drive premiumisation in consumer segments

Issel pointed to the consumption sector as particularly promising, where declining inflation could enhance affordability and support premiumisation trends across various consumer categories. The financial sector's appeal stems from current valuation levels that present attractive entry points for investors.

The forecast represents a significant vote of confidence in India's equity markets, with UBS expecting the country to stand out among global markets for sustained earnings growth momentum into 2026.

Following Nifty's unprecedented 10-year winning streak in 2025, market participants are setting ambitious targets around 29,000 for 2026. However, financial analysts have identified multiple risk factors that could impact this projected rally. Pradeep Gupta, Executive Director-Head of Investments India at Lighthouse Canton, noted that external shocks could create near to mid-term volatility, particularly geopolitical distortions and US-led slowdown in global growth cycles.

Trade Relations and Policy Risks

Bank of America Securities has flagged US-India trade deal delays as an immediate concern. The firm believes markets are already pricing in a US-India trade deal, with any delay in announcement beyond January-February 2026 potentially disappointing markets. The bank's base case expects India to attract 15% tariffs from the US, while a more severe scenario of sustained tariffs at 25-50% could trigger significant volatility.

Abhishek Jain, Head of Research at Arihant Capital Markets, identified political uncertainty as a significant risk factor. Markets remain forward-looking but have not fully priced in global electoral volatility, particularly the US election that could shift fiscal priorities, regulatory outlooks, and foreign policy in areas like trade and technology.

Technology and Valuation Concerns

The concentration in AI-driven US tech stocks poses systemic risks to global markets, including India. Bank of America noted that a sharp correction in US equity markets, particularly driven by unwinding of the AI-led valuation bubble, represents a meaningful risk for Indian equities due to strong correlation between Indian and US markets. Elevated positioning in AI stocks and stretched multiples could trigger capital flight to safety and foreign outflows from emerging markets.

Regarding earnings and valuations, HSBC emphasized that India needs to grow faster than the region to justify current trading valuations. In the absence of anticipated cyclical growth pickup, valuations will likely remain a concern. Krishnan VR, Chief of Quantitative Research team at Marcellus, highlighted that while broad markets corrected in 2025, investors should remain mindful of valuation risks in sectors like auto and defence stocks.

Commodity and Currency Risks

Bank of America's commodities analysts expect Brent crude to average $60 per barrel in 2026 versus $69 per barrel in 2025, but identified upside risks including geopolitical developments, stronger economic growth, and strong demand from China. A $5 per barrel annual increase in crude prices could add $6 billion to India's current account deficit.

While Bank of America and consensus expect the rupee to appreciate 3-6% in 2026, multiple factors could trigger depreciation including widening current account gaps, lower exports from trade deal delays, continued foreign institutional investor outflows, and fiscal slippages.

Market Supply Dynamics

HSBC warned about record-high equity supply levels, with fresh equity supply via primary or follow-up offerings exceeding $5-6 billion in recent months. The firm estimates that approximately 65% of new money raised went to existing shareholders via offer-for-sale rather than into companies themselves. This supply-demand imbalance poses risks unless foreign investors return in significant numbers.

These identified risk factors serve as important considerations for market participants as they evaluate Nifty's potential trajectory towards the 29,000 target in 2026, highlighting the need for careful monitoring of both domestic and international developments.