Bernstein Calls Bottom on India Market Correction

Bernstein has turned bullish on Indian equities, arguing that recent market corrections have bottomed out and recommending investors “start buying selectively” despite ongoing macro challenges.

In a strategy note published Thursday, the broker set a year-end Nifty 50 target of 26,500 for 2025, implying about 12% upside from current levels. This marks a shift from their previous cautious stance throughout 2024, when they had warned of macro and earnings risks.

“The period of gloom has not been suddenly discovered. The bubble was long building, but acknowledgement is recent,” wrote Venugopal Garre, Bernstein’s India strategist. He said that earnings misses, weak GDP numbers and Federal Reserve commentary had triggered a nearly 10% fall in markets and 2.4% depreciation in the rupee within one quarter.

The broker draws parallels between current conditions and 2005, which saw similar trends of strong early-year growth followed by second-half weakness. Like then, Bernstein expects growth to return within two quarters, arguing India remains in an early cycle experiencing a temporary correction.

“With the 5% growth in September and low industrial growth, we believe this phase represents a bottoming,” Garre said, while acknowledging some risks to FY26 consensus earnings remain.

The report maintains overweight positions in IT, financials and telecom sectors, while upgrading utilities to overweight. However, it downgraded healthcare to underweight citing peak valuations amid declining momentum.

Bernstein said that domestic investment flows have proven more resilient to recent turbulence compared to previous cycles, estimating household allocation to equities has grown to 15% from typical peaks of 9%.

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