Nifty's Challenges: Navigating Tariff Tensions and Earnings Downgrades

Amidst US tariff-driven trade tensions, the Nifty index's earnings forecasts for FY26 face reductions. PL Capital’s report predicts a tougher market with lower valuations and growth estimates. Despite adjustments, sectors like domestic pharmaceuticals and banking show promise in the near term.

The ongoing trade tensions influenced by US tariff policies continue to impact financial forecasts, particularly for the Nifty index. A new report by PL Capital suggests further reductions in earning targets for the first half of FY26 due to these uncertainties.

The report highlights that the Nifty index's earnings per share (EPS) forecasts for FY26 and FY27 have been cut by 6.2% and 5.6% respectively, since October 2024. The revised valuation reflects a 7.5% discount compared to the long-term average price-to-earnings (PE) ratio.

In response, the projected 12-month target for Nifty has been adjusted to 25,521. Sector-wise, domestic market-focused areas like hospitals, pharma, and banking are expected to show resilience, despite prevailing economic challenges.

(With inputs from agencies.)