Nifty Target Hiked to 27,123 Despite Monsoon Risks

Mumbai | August 27, 2026 

India’s equity markets have stayed resilient despite deficient monsoons and geopolitical uncertainty, but a strengthening El Niño and rising inflation pose fresh risks to the rally’s breadth. Nifty stood at 24,208 and Sensex at 77,473 as on 26 August 2026, with Nifty trading at an 11.7% discount to its 15-year average valuation. 

Monsoon deficit clouds rural demand outlook 

India’s monsoon deficit stood at 14% as of late August, with nearly 17 to 18 of the country’s 36 meteorological subdivisions recording deficient rainfall. Reservoir levels are down 20% year-on-year and kharif sowing is running 2% lower than last year, led by rice and cereals. 

Skymet’s August forecast puts the probability of drought at 70%, with an overall seasonal deficit of 15%, against the IMD’s “below normal” estimate of 90% of the long-period average. A weak monsoon could hurt farm income and rural consumption while pushing up food inflation. CPI inflation is projected at 5% for FY27, peaking at 5.9% in the October-December quarter. 

June quarter earnings support the raised Nifty target 

Corporate earnings for the June 2026 quarter came in stronger than expected. The coverage universe, excluding oil and gas, posted sales growth of 15.5% and PAT growth of 17%, the best pace since the March 2024 quarter, even as EBITDA margins fell 148 basis points on supply chain disruption and firmer crude prices, most visibly in autos, cement, consumer and travel. 

Nifty trades at 17.3 times one-year forward earnings against a 15-year average of 19.6 times. Its EPS is estimated at Rs 1,349 for FY27 and Rs 1,537 for FY28, a 15.8% CAGR. Valuing Nifty at a 10% discount to its long-term average PE gives a base case target of 27,123. The bull case stands at 30,137 and the bear case at 24,971. 

Banks lead portfolio stance, three stocks added to conviction list 

The model portfolio remains overweight on banks, capital goods, diversified financials, metals, healthcare, telecom and ports, and underweight on autos, consumer and IT services on rising input costs and muted growth prospects. Credit growth held at 18.6% in June, while the RBI’s FCNR deposit scheme, closing on 31 August, had drawn USD 52.3 billion as of 14 August and could reach USD 75 billion, easing system liquidity for banks. 

Supreme Industries, Amber Enterprises India and Aster DM Quality Care have been added to the conviction picks list, replacing Britannia Industries, Titan Company, DOMS Industries and Rainbow Children’s Medicare. The model portfolio has outperformed Nifty by 30% since November 2018. 

Outlook 

A possible 25-50 basis point rate hike is expected in the second half of FY27, depending on crude prices and geopolitical developments, after recent hikes by the ECB, Japan and South Korea. The RBI’s Monetary Policy Committee held the repo rate at 5.25% with a neutral stance at its last review, while raising its FY27 GDP growth estimate by 10 basis points to 6.7%. Margin pressure across sectors is expected to build through the September quarter as companies work through older, cheaper raw material stock and replace it at current, higher prices. 

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