PL Capital sees Indian markets holding steady despite tariffs, FII outflows, and trade uncertainty

The domestic markets have remained largely flat over the past three months, despite headwinds such as the increasing imposition of US penal and non-penal tariffs and ₹850 billion worth of FII selling, the latest report by PL Capital read. Favourable monsoon conditions and an anticipated recovery in domestic demand have been key factors helping the markets withstand the prevailing negative news flow.

The brokerage noted that as geopolitical situation remains fragile, and India is absorbing the impact of penal tariffs and hefty increase in fee for H-1B visas. However, rising GCC exports will curtail any significant negative impact on overall economy. 

On the market front, PL Capital values Nifty at its 15-year average P/E multiple of 19.2x, based on a September 2027 EPS estimate of ₹1,499, leading to a 12-month target of 28,781 (up from the previous 27,609). In the bull case, PL Capital applies a higher multiple of 20x, resulting in a target of 30,220 (earlier 28,990). In the bear case, assuming the Nifty trades at a 10 per cent discount to its long-term average, the firm derives a target of 25,903 (previously 24,848).

Emphasising that the domestic oriented sectors will continue to outperform, PL Capital said it expects banks, NBFC, auto, retail, consumer staples, defence, metals and select durables to outperform.   

Strong Q2FY26 earnings forecast

Under its coverage universe, PL Capital estimates robust growth for the second quarter of Fiscal Year 2026 (Q2FY26), predicting a 9.7 per cent rise in sales, 11.2 per cent growth in EBIDTA, and 9.9 per cent increase in Profit Before Tax (PBT).

The growth trajectory is expected to be largely steered by commodities, including metals, cement, and oil and gas, along with telecom, AMC, and EMS sectors. Conversely, banks, Housing Finance Companies (HFCs), media and travel sectors are projected to report a decline in PBT.

Consumer, IT, hospitals and pharma will report single digit PBT growth.

Top picks

The brokerage prefers stocks such as Adani Ports, Apollo Hospitals, Britannia, HAL, ICICI Bank and ITC under large cap; and Amber Enterprises, DOMS Industries, Eris Lifesciences and Voltamp Transformers under mid/small caps.

It has further added Mahindra & Mahindra, Tata Steel, State Bank of India, Amber Enterprises India and Latent View Analytics in conviction picks and removed Bharti Airtel, Aster DM Healthcare, Crompton Greaves Consumer Electricals and Ingersoll Rand (India).

Published on October 14, 2025