Analysts said the revised target up 8.1 per cent from the current level assumes an 18-fold valuation multiple on 2027‑28 (FY28) earnings, which they expect to grow about 9 per cent over FY27.

However, a 4-5 per cent rally would take Indian equities out of their current valuation comfort zone, bringing them closer to recent averages at around 18.2 times forward earnings.

The report said that a cut in long‑term capital gains (LTCG) tax would be welcome for a capital‑starved economy but is insufficient on its own to trigger sustained foreign institutional investor inflows. “A sharp 1–2-day market rally that a cut would trigger may actually be used to offload positions,” an analyst said.

Finance Minister Nirmala Sitharaman had touted the government’s openness to considering removal of LTCG tax in consultations regarding the upcoming Union Budget. 

India has limited scope to gain materially from a near-term pause in the artificial intelligence (AI) trade, the report said, adding that Indian equities lack the return profile and the investment opportunities attracting global capital into AI-related investments.

The brokerage noted limited room for policy support, with the goods and services tax (GST)-led gains likely to fade as base effects set in and prices rise.

Further, weaker monsoons and substantially lower reservoir levels also pose near-term risks.

“Yields are firming, while crude and commodity prices remain a challenge. Geopolitics is also unfavourable, with limited visibility on a US trade deal and continued risks around Russian oil sourcing despite waivers. Against this backdrop, the heady macro growth of the previous quarter is unlikely to repeat,” the report noted.