Nifty 50, Sensex Smash Record Highs: Earnings Boom Fuels 15% Rally to 30,000 by 2026

India's stock benchmarks surged to record highs on Thursday, powered by cooling valuations, expectations of an earnings recovery, and a resilient economy supported by favourable fiscal and monetary policies.

The Nifty 50 rose as much as 0.40% to 26,310.45, while the BSE Sensex gained 0.52% to 86,055.86, both surpassing previous all-time highs touched in September 2024. The indexes closed little changed due to profit taking, just shy of record closing highs.

Asia's third-largest economy is projected to have grown nearly 7% in the July-September quarter, and is expected to expand at 6.8% in the current financial year ending March 2026.

"Early signs of an earnings recovery in the September quarter and expectations of further improvement in the second half of FY26 have created a constructive market view," said Amit Premchandani, fund manager at UTI Mutual Fund.

J.P. Morgan expects the Nifty to climb to 30,000 by end-2026, implying an upside of about 15%, according to a note on Wednesday.

EARNINGS IGNITE MARKET REVIVAL

Indian companies posted their strongest earnings revival in more than a year in the latest quarter, with brokerages turning upbeat on profit growth amid a consumption rebound, driven by benign inflation, tax cuts and lower borrowing costs.

Consolidation in the benchmarks over the past 14 to 15 months bridged the gap between earnings and valuations, creating attractive entry points, said Aditya Sood, fund manager at InCred Asset Management.

Valuations have now eased from September 2024 levels, while steady domestic participation has helped soften bouts of volatility, he said.

The Nifty trades at 22.7x 12-month forward price-to-earnings, down from 23x-25x about 14 months ago. An earnings slump last year had pushed down multiples to 18.5x-19x in early 2025.

With the earnings-valuations gap narrowing, the market is on a steadier footing now, leaving room for further gains.

Lower valuation premium versus Asian peers has drawn overseas investors back, particularly as the earnings outlook strengthens.

"It's now about corporate profitability and as earnings improve, markets have responded with record highs," said Aishvarya Dadeech, founder of Fident Asset Management.

DOMESTIC MUSCLE COUNTERS FOREIGN PULLBACK

Analysts say that sustained domestic buying has cushioned the market against outflows. Equity mutual funds have been seeing uninterrupted inflows since February 2021 and SIP contributions have hit record highs despite market volatility.

Equity mutual funds have purchased domestic shares worth 2.92 trillion rupees ($32.94 billion) in 2025 so far, outpacing foreign outflows of $16.9 billion over the same period.

India's relatively low AI exposure has also offered global investors a natural hedge.

"Indian benchmarks' significant underperformance over Asian and emerging market peers during the past 12 months may bring back foreign flows into equities, while a potential India-U.S. trade deal could also be a positive trigger for portfolio flows into equities," said Jefferies analysts led by Mahesh Nandurkar.