'India looks cheaper, but it is still expensive': Bernstein cuts Nifty target for Dec 2026 to 25,000

Valuations have fallen—but not enough The Nifty’s 12-month forward price-to-earnings ratio has fallen to 16.6 times, its lowest in six years. It is also the first time since June 2022 that the index has traded below 17 times forward earnings. Those levels were last seen during the Covid-era market crash and the 2022 sell-off. But Bernstein warned against reading the fall as a sign that Indian stocks have become cheap.

India remains the third-most expensive equity market globally, according to the brokerage. It continues to trade at a premium to several Asian markets that offer stronger medium-term growth. “A market can look inexpensive against its own history and still look expensive to a global investor choosing between regions,” the report’s argument suggests. Bernstein said the comparison with the Nifty’s own past could be misleading, especially after two years of modest earnings growth.

Domestic flows are supporting prices Domestic institutional flows have kept valuations from falling further. Bernstein described the current level of mutual fund and SIP-driven buying as unprecedented, saying it has provided a floor for the market even as foreign investors remained net sellers for much of the year. That support, however, has also prevented valuations from correcting to levels that would make Indian equities compelling on a relative basis.

Earnings remain the missing trigger The bigger constraint is earnings. Bernstein said FY27 estimates have not turned positive, with only marginal upgrades over the past three months and continued cuts in several sectors. The brokerage also flagged macro headwinds: elevated crude prices, geopolitical uncertainty, limited visibility on a US trade deal, and weak monsoon and reservoir conditions. It does not expect the strong growth recorded in the previous quarter to repeat easily.

Limited room for re-rating Bernstein said a further 4–5% rally could take Indian equities out of their current valuation comfort zone, pushing multiples closer to the recent average of about 18.2 times forward earnings. That leaves limited scope for a clean, valuation-driven re-rating. A more decisive rally, the brokerage indicated, would require either a clearer recovery in corporate earnings or a further fall in valuations that narrows India’s premium to higher-growth Asian markets.

The market is therefore in an awkward middle ground as of today: cheaper than it was, still expensive relative to peers, and short of the catalyst needed for a sustained re-rating.