29,300 to 24,900: Nomura cuts Nifty target, says further 5% correction possible! Here’s why

International brokerage firm Nomura cut its target for the Nifty to 24,900 for December 2026, a sharp decline of 15 percent from its initial target of 29,300 last year. Additionally, analysts warned that the 50-share index could fall another 5% after falling 8% since the start of the US, Israel-Iran war on February 28.

“We think an additional 5% correction (similar to the correction during the Russia-Ukraine war) is a distinct possibility in the near term, with small and midcap stocks relatively more vulnerable,” Nomura said in a March 16 report. The threshold is lower for FIIs, which is heightened by the impact of AI and concerns over high oil prices,” it added.

Continued geopolitical tensions in the Middle East following an attack on Iran present a material threat to the oil and gas supply chain. Shipments through the critical Strait of Hormuz have stalled. These shipments mainly relate to oil and gas. Shipments of oil and gas through chokepoints account for more than 20% of global trade in these commodities.

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India remains heavily dependent on imports for crude oil, natural gas and LPG, making it particularly vulnerable to external shocks. The Strait of Hormuz alone accounts for about 43% of the country’s crude oil imports and about 63% of its LNG imports, highlighting the scale of exposure of this critical route.

Any disruption in supply can have a wide-ranging impact on the economy, as most manufacturing industries are closely linked to the oil and gas supply chain. Nomura said continued increases in oil and gas prices could derail the recovery of new growth, push up inflation and put additional pressure on the country’s external balance.

Indian markets have recovered 8% in the last two weeks with Nifty as a proxy. Such sharp declines have only been seen twice in the past decade, during the Covid-19 pandemic in 2020 and at the start of the Russia-Ukraine conflict in 2022.

Evaluation is also meaningfully moderated. In terms of price-to-earnings multiples and bond yield spreads, the market is now at the lower end of the range seen over the past four years, the brokerage said.

“Hence, a correction of more than 5% from current levels represents a buying opportunity from our view, from a long-term perspective,” the analysts added.

Are earnings at risk?

A persistently high energy price environment is likely to weigh on FY27 earnings. If oil prices remain around $100 per barrel, overall corporate earnings may see a downward revision of 10-15% compared to current consensus estimates.

Currently, consensus expectations factor in earnings growth of around 16% for FY27 (BSE 200+). However, such cuts could dampen growth sharply, resulting in flat to mid-single-digit earnings growth for the year.

Will FII sales worsen?

FIIs have been net sellers in the last two years, especially in the secondary market. Initially, the elevated valuation was a concern. This is followed by the emergence of AI trade, where India is considered to be at a net loss. Investors are concerned about the IT outsourcing business model, which could affect the broader economy. Elevated oil prices now present an additional headwind for sentiment. “Against this backdrop, we feel that the valuation threshold for FIIs is lower than in the past.”

Equity markets in India have been the backbone of domestic inflows. SIP inflows have remained resilient, driving a steady positive inflow into mutual funds. However, Nomura says inflow growth has slowed in the recent past. If the crisis drags on, domestic inflow growth may slow further.

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