“We see additional draw back for Indian equities in Q1FY26, however the complacent response to the reciprocal tariffs by the U.S. The direct influence on India could also be muted, however the ensuing U.S. recession poses a ~3% threat to FY26 Nifty EPS, and the ensuing derating may push the Nifty all the way down to 21,500,” mentioned Seshadri Sen, Head of Analysis at Emkay World.
Monitoring world cues, the Nifty fell round 1% intraday to slide beneath the 23,000 mark. Indian markets, nonetheless, stay comparatively resilient, with the decline much less extreme than in world friends. The Nasdaq ended the in a single day session 6% decrease, Japan’s Nikkei was down over 3%, and Australia’s ASX 200 dropped 2.5%.
Markets in China, Taiwan, and Indonesia had been closed for a vacation.
US Tariffs and Second-Order Dangers
The 26% U.S. reciprocal tariff is a unfavorable for India, although the nation is comparatively much less impacted than different Asian nations—a skinny silver lining in a darkish cloud. Nevertheless, absolutely the loss in exports to the U.S. continues to be a setback.
“The second-order impact will damage India extra. We are actually assuming a extreme U.S. recession and a major short-term correction in world commodities. Metals will likely be hit probably the most, adopted by expertise, whose greater index weight has a bigger market influence. Autos and chemical compounds are additionally in danger,” Emkay famous.
Earnings Threat and Nifty Valuations
Emkay sees a 3% proforma threat to its FY26 Nifty EPS estimate of Rs 1,160, primarily from potential tech earnings downgrades, on condition that consensus had been constructing in a restoration. Metals—a major contributor to FY26 Nifty EPS—are actually seen as weak resulting from new capability additions and falling costs.“Within the quick time period (Q1FY26), we see the danger of the Nifty correcting to 21,500 as valuations may fall to -1 normal deviation ranges of 18.3x on decrease earnings. Lengthy-term projections are unsure, given the shortage of visibility on each coverage actions and their broader implications. However, we’re rolling ahead our long-term Nifty goal to March 2026 (from December 2025) to 26,000, primarily based on the revised FY27 Nifty EPS estimate of Rs 1,320 and a goal valuation of 20x, consistent with the long-term common,” the brokerage added.
For now, traders ought to brace for heightened volatility because the Nifty stares at a possible correction to 21,500 within the coming months.
