Summary of this article
The Nifty 50 recently hit an all-time high of 26,325.8 on December 1, following a strong three-month rally.
PL Capital predicts the benchmark index will climb to 29,094 by 2026, estimating a 12 per cent upside.
Key drivers for this rally include robust corporate EPS momentum, income tax and RBI rate cuts boosting demand and other factors.
The Nifty 50 has recently touched its all-time high in December, a year defined by volatility and uncertainty caused by protectionist trade policies and rampant geopolitical tensions between countries such as Russia and Ukraine, India and Pakistan, and Israel and Iran.
The benchmark Nifty climbed to its all-time high levels at 26,325.8 on December 1. The gains followed a three-month rally in which the headline index climbed nearly 4 per cent. Financial services firm Prabhudas Lilladher (PL Capital) expects this rally to continue.
The financial services firm said in its recent report that the Nifty 50 is likely to rally to 29,094 levels in 2026. Notably, the Nifty 50 finished today’s session at 25,986, down by 46.2 points or 0.18 per cent. Given the current levels of the benchmark index, the financial services firm estimates a steep 12 per cent climb ahead in the next 12 months.
“We value NIFTY at a 15-year average PE of 19.2x with Sept 27 earnings per share (EPS) of 1515 and arrive at a 12-month target of 29,094,” PL Capital said in the report.
The financial services firm also shared the various factors which are likely to help the Nifty 50 in climbing to 29,094 levels in 2026. Here’s a look at some of the key factors which are likely to fuel Nifty's rally by boosting corporate earnings (EPS) and driving domestic consumption:
Corporate Earnings Momentum
PL Capital’s report highlighted that the Nifty's earnings trajectory has recently ended a sustained phase of pessimism as the corporate performance in Q2FY26 led to the first Nifty EPS upgrade after August 2024. The financial services company projected a robust earnings growth outlook, estimating EPS to grow with a compounded annual growth rate (CAGR) of 13.8 per cent between FY26-28. The EPS upgrade is likely to contribute to the benchmark’s anticipated rally by fundamentally justifying a higher market valuation.
Income Tax Cuts And RBI’s Rate Cut
The financial services firm anticipates income tax rate cuts to boost demand in the next fiscal year as well. Earlier in the Union Budget 2025, the Finance Minister, Nirmala Sitharaman, announced a reduced personal income tax for individuals earning up to Rs 12.75 lakh per annum. On the other hand, the 100 basis points rate cuts announced by the Reserve Bank of India are also expected to drive demand and aid the rally.
Notably, these two policy decisions are expected to directly add to the consumer’s purchasing power and act as a fiscal stimulus. While the reduced tax load increases the discretionary income of the individual, the rate cuts allow for lower costs for both borrowers and lenders. This ultimately is expected to boost the Private Final Consumption Expenditure (PFCE) and generate revenues and profits for consumption-oriented companies, helping the Nifty EPS grow with a 13.8 per cent CAGR.
12-Year Low Inflation
The report highlighted low inflation as a significant factor to enable a consumption-driven recovery on D-street. Notably, headline inflation has declined to a low of 0.25 per cent in October 2025. The 12-year low inflation increases the purchasing power of money and aids planned and stable spending. The low inflation also allows the RBI to consider future rate cuts without risking price stability. The spending can potentially improve margins and make future earnings growth more predictable.
GST Rates Rationalisation
The financial services firm expects the GST rate rationalisation exercise of the government to continue to boost demand by making goods more affordable, which can potentially lead to higher sales volumes in the upcoming quarters. Higher sales for consumer-focused companies directly impact the Nifty as auto and consumer discretionary stocks are heavily weighted in the Nifty 50.
Normal Monsoons
The financial services firm expects the normal monsoon to continue to create tailwinds for the economy by boosting rural demand vis-à-vis better agricultural output. Ultimately, a robust rural economy can provide a safety net and sustain the consumption theme for the Nifty's steep climb ahead.
