Brokerage firm Bank of America (BofA) has released its latest India strategy, offering insights into the Nifty50, Foreign Institutional Investor (FII) flows for Calendar Year 2025, and the broader market outlook.
The brokerage expects the Nifty to underperform US equities in dollar terms. Despite a 7% correction, the index remains expensive across valuation metrics, making further valuation expansion unlikely.
BofA has set a target of 26,500 for the Nifty, translating to a return of less than 9% in Calendar Year 2025.
Broader markets are expected to see even muted returns given their rich valuations.
However, potential fiscal or monetary stimulus and a lighter events calendar, which could pave the way for policy reforms, are identified as upside risks.
According to BofA, earnings growth is likely to remain weak, driven by subdued trends in commodities, capital expenditures, and credit growth. Additionally, US policies on trade, immigration, fiscal matters, and geopolitics are expected to influence market volatility in India.
The brokerage noted that weak capex, high welfare spending, and slower reforms would make it difficult to justify India’s premium valuations.
BofA expects FII flows to remain weak in Calendar Year 2025 due to strong US bond yields.
The brokerage also expects the pace of Domestic Institutional Investor (DII) inflows to moderate and could be further offset by continued strong fundraises.
Lastly, with sector allocations between FIIs and DIIs currently aligned, any significant earnings surprises—positive or negative—could trigger outsized market reactions.
Another global bokerage Citi’s September 2025 target for the Nifty is 25,000. Citi said that Nifty valuations have become more reasonable, with the index’s one-year forward price-to-earnings (P/E) ratio now only slightly above its five-year long-term average.
Goldman Sachs expects the Nifty50 to reach the 27,000 mark by the end of 2025, supported by underlying earnings growth estimates of 13% and 16% over the next two years.
While speaking at CNBC-TV18’s Global Leadership Summit, market veteran Raamdeo Agrawal said he expects the Nifty to hit 30,000 when the FIIs come back to Indian markets.
“Earnings are slowing down, so there is a clear challenge for the earnings to come back. Maybe it would take 6 months for the earnings to come back, but they will come. We need fiscal or monetary help. And it will come. Have patience and wait. Foreigners are getting out today. But when they come back to buy, they won’t get the same prices. Maybe when they come back, the Nifty index will be 30,000. Foreign investors who exit India may not find a similarly competitive price to make an entry elsewhere,” Agrawal had said.
The Nifty50 has risen for the third consecutive session on Wednesday and has recovered over 1,000 points from the November 22 low of 23,359.
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