Key Points

BofA points to several key risks clouding the market outlook -- including potential US trade tariffs on Indian goods, a cloudy US macroeconomic scenario, delayed or insufficient fiscal and monetary policy responses, and the implications of state elections across six major Indian states, which together account for over 16 per cent of India's public subsidy and capex spending.

"We keep our Nifty year-end target intact at 25k but expect Nifty to swing -11% to 4% vs this target, as markets reacts to emerging developments around key factors such as trade tariffs, US economic outlook, FED/RBI cuts, potential policy/fiscal support to offset tariff impact, etc," the report added.

The firm expects Nifty earnings growth to remain subdued, projecting 7 per cent growth in FY26 and 11 per cent in FY27, well below the Street's expectations of 9 per cent and 15 per cent, respectively. Each earnings season, it warns, could bring corrections rather than sustained rallies.

The firm sees a potential upside if India implements some timely legislative and fiscal reforms, possibly funded by higher RBI dividends, asset sales, fuel duties, and leveraged capex projects.

According to publicly available market data, the Nifty at NSE and the BSE Sensex have not performed as expected, as both benchmarks have continued their worst losing streak in over two decades. Nifty 50 and Sensex have so far declined about three per cent, contributing to cumulative drops of approximately 12.6 per cent and 11.7 per cent, respectively, from their all-time highs set in September last year.

- ANI