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Nifty Reclaims 200 days EMA and set for a consolidation breakout…

ICICIdirect Research 31 Jul 2026 DISCLAIMER

Defying global volatility, Nifty benchmark staged a strong recovery propelled by easing crude oil, strengthening rupee and settled the week on a positive note at 24400, up 2.6%. The broader market performed in tandem with the benchmark, gaining 2.5% for the week.
Nifty reclaimed 200 days EMA (24370) after 5 months. Going ahead, sustainability above the same would be the first sign of conclusion of the past three months consolidation
After ~11% surge in April, Nifty’s 1500 points consolidation phase absorbed major geopolitical headwinds. Thereby established durable higher base
The optimism around Q1 earnings is shifting from large caps to midcaps. Following 5 weeks of breathing in the vicinity of All time high, the Midcap Index has regained momentum

Our constructive stance is based on following observations
Nifty gained ~700 points in just 7 trading sessions amid risk-off in global AI trades and de-escalation in middle east tensions. The sharp sell-off in AI related stocks globally might have prompted renewed flows into Indian equities.
Key AI related markets like KOSPI (Korea) and Taiwan have seen a decline of ~40% and 18% from their highs indicating, waning of AI euphoria. Moreover, gradual decline in energy prices seen since June has helped in renewed flows in Indian Equities.
As a result, FIIs have been largely net buyers since mid-June and they have bought over ~35k crores since then. The inflows of ~20k in Indian equities (Primary and Secondary) in July are the highest seen in more than a year.
However, the recent recovery in markets can be largely attributed to sharp recovery among Technology stocks despite weakness seen in Financials. Alongside the sharp correction in the KOSPI (Korea), cheaper Indian IT company valuation and the renewed GenAI trade fears have triggered ~16% rally in the Nifty IT index (~7.5% weight in Nifty) over the last month
Looking at the structural improvement, the breakout from past three months consolidation 24600-23100 looks imminent that would unlock the next leg of up move towards 25500 in coming months led by Banking, Auto, Metal, Defence. Meanwhile, strong support is placed around 23800.
 
Q1FY27 Corporate Earnings - tracking ahead of expectations
Despite geopolitical uncertainties and the resultant spike in key commodity prices, particularly crude oil and metals, India Inc. has delivered a resilient start to the earnings season, with corporate performance broadly surpassing expectations.
Among the 32 Nifty 50 companies that have reported Q1FY27 results so far, aggregate revenue and adjusted PAT have grown 17% YoY and 12% YoY, respectively—comfortably ahead of the Street's expectation of 5–8% YoY earnings growth for the index.
The broader earnings trend continues to favor mid- and small-cap companies, with profit growth exceeding 30% YoY (adjusting for OMCs, which operated under unprecedented circumstances while absorbing the impact of geopolitical disruptions on retail fuel prices).
For the listed universe (excluding OMCs), aggregate sales and PAT have grown 18% YoY and 24% YoY, respectively. Including OMCs, the corresponding growth stands at 20% YoY for revenues and 12% YoY for earnings.
With the earnings season tracking ahead of expectations, we see no material risk to our FY26–28E Nifty earnings CAGR estimate of 16%. Accordingly, we maintain our Nifty target of 28,000, based on a 20x P/E multiple on FY28E earnings.
The Nifty currently trades at 17.3x two-year forward P/E, below its long-term average of 18.2x, offering a reasonable valuation cushion and maintaining a favorable risk-reward proposition for long-term investors.

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