Stockbrokers trade at their terminals at the National Stock Exchange (NSE) in Mumbai, India, October 21, 2025. REUTERS/Francis Mascarenhas

By Vivek Mishra and Pranoy Krishna

BENGALURU (Reuters) -India’s stock market will reach record highs by mid-2026 and extend those gains through next year, a Reuters poll of equity analysts showed, as strong domestic buying overtakes stretched valuations and a flight of foreign capital.

Foreign investors have pulled nearly $17 billion from Indian equity markets so far this year, the biggest annual outflow on record, as slower nominal gross domestic product growth and 50% U.S. tariffs on Indian goods caused local stocks to lag behind broader emerging-market indexes for the first time in five years.

But domestic institutional buyers stepped in with $77 billion worth of purchases, a powerful counterweight that kept the market afloat. Most analysts in the poll said that trend was unlikely to reverse soon.

The Nifty 50 is expected to rise about 5.0% to 27,200 by June 2026 before reaching 28,500 by the end of the year and 28,850 by mid-2027, according to a November 17 to 26 poll of 25 equity analysts. The BSE Sensex is expected to climb to 89,430 by mid-2026, 92,400 by the end of 2026 and 95,000 by mid-2027.

Those forecasts are higher than in the previous quarterly survey. The Nifty is up about 10% for the year.

"Domestic investors will continue to support the market, providing stability," said Yogesh Kalinge, associate director of research at A.K. Capital Services.

"Indian markets have delivered near-zero returns since September 2024, while global markets have rallied. This period of underperformance has made valuations reasonable ... We may not see an immediate outpouring of funds from foreign investors but I anticipate a shift toward gradual inflows."

While India remained the world's fastest-growing major economy - it was expected to expand 7.3% last quarter - corporate earnings have been subdued. Profit gains have been stuck in the mid-single digits for several quarters, stoking fears among market participants of lofty valuations.

Still, nearly three-quarters of the analysts who answered an additional question, 17 of 23, said a correction - defined as a drop of 10% or more - was unlikely. The remaining six said a correction was likely.

India's Sensex trades at around 25 times forward earnings, among the world’s highest performers and nearly matching Wall Street’s S&P 500, LSEG data showed.

"To foreign investors, India may not offer a large capital market exposure; we don’t move the needle for them," said Kishan Gupta, director at CD Equisearch. "We’re a small part of their portfolio and liquidity here is concentrated in just a handful of stocks. Domestic liquidity is extremely strong, and it may continue to mask not-so-strong fundamentals."

"If not for the huge domestic liquidity, the market would have fallen much more."

(Other stories from the Q4 global Reuters stocks poll)

(Reporting by Vivek Mishra and Pranoy Krishna; Polling by Rahul Trivedi and Susobhan Sarkar; Editing by Hari Kishan and Thomas Derpinghaus)