Nifty 30,000 target still on track; why Elara’s Harendra Kumar prefers IT, power and smallcaps

Elara Securities remains bullish on the Nifty despite the index’s prolonged stagnation, with Managing Director and CEO Harendra Kumar maintaining that the 30,000 target is achievable over the next 15 months. He expects a 15%-20% market return as the rupee stabilises, foreign investor flows turn positive and earnings hold up, while favouring technology, power, NBFCs and smallcaps over yesterday’s large-cap darlings.

Edited excerpts from a chat with Kumar on the sidelines of Ashwamedh — Elara India Dialogue 2026.

Elara had given a target of 30,000 for Nifty earlier in the year. Given that the index has not moved up an inch in the last 2 years, and that the outlook for a few heavyweight largecaps and IT stocks remains weak, do you think the target is still achievable?


Harendra Kumar: First and foremost, we are not revising our earnings estimates, and that process is progressing well. The Q1 numbers are testimony to the fact that our earnings outlook is strong and broadly in line with our expectations.

After we wrote that note, the West Asia crisis occurred and the rupee depreciated. The good part is that once rupee depreciation bottoms out and becomes orderly, the market has historically tended to perform about 20% better over the ensuing 15 months. That pattern remains in play. The move from 28,000 to 30,000 on the index is still achievable over the next 15 months.

We are telling people that this is the right time to look at the market constructively. Historical evidence suggests that this is the time to invest — after phases like this, FII flows also turn positive. Even now, FII flows are beginning to improve.

There are two or three catalysts at work. The headline index view is positive, the rupee has more or less bottomed out, and the government has shown through the FCNR(B) mechanism that it can manage a currency crisis. India also has the lowest weight in emerging-market indices, and the AI trade is fizzling out — India had effectively become an "anti-AI trade," and that's the current market construct.

Our base case is a 15% to 20% return over the next 15 months. It could go higher, because once momentum picks up, markets can go anywhere. But if you ask about the next two years, this is the construct: after next year, earnings for the Nasdaq, Dow Jones and KOSPI are expected to fall off a cliff. The risk-reward currently favours India.

So while the next 2-3 years may look bright, how do you justify the view that FIIs will come into the market and move beyond Nifty companies?

Harendra Kumar: Within the Nifty, there are consumer discretionary companies and NBFCs. People are too focused on yesteryear's darlings. Those companies are finding it difficult to show organic growth, and their terminal value is being challenged by other Nifty constituents such as NBFCs.

These NBFCs are agile and use technology well. They display the aggression, growth and tech adoption that private banks used to display — which is why we've moved away from some private banks. We need to shift our lens.

Over time, many new technology companies will enter the Nifty. There will also be power stocks going through substantial capex, and consumer discretionary companies — particularly automobile companies — performing very well.

Within this laggard group, there will also be a bounce trade in technology. The market is beginning to recognise there is no threat to the existence of Indian IT — though the business model will evolve.

It's now established that large language models are controlled by companies such as Oracle, Microsoft and IBM. You need a second layer of services or applications on top. That's where the play lies.

The problem is that Indian IT companies haven't been able to articulate their pricing and product strategies. It isn't that the opportunity doesn't exist — it's that they don't know how to price their products. There's deflation in pricing.

The chairman of NASSCOM made an important point earlier that the constraint was having enough engineers to code. Companies that could hire more engineers could do more, while smaller companies could do less. With AI, there's now a strong possibility of reaching a larger client base with fewer engineers.

India's market opportunity could therefore expand exponentially — with fewer engineers, companies can serve more clients and do more business. The market hasn't recognised this yet because no one has demonstrated it.

At present, the terminal value equation has been disrupted, so stock prices have had to decline. Investors are asking themselves what will drive the next leg up, because no one has explained it.

We've seen this through earlier cycles — Y2K, the dot-com period, cloud and digital initiatives, and now AI. It will happen again. Going forward, technology, more than banks, will be the preferred play in the Nifty.

Read more: Nifty could fall to 23,260 if it fails to reclaim 24,215: Anand James

Does that mean Nifty IT has clearly bottomed out?

Harendra Kumar: That's correct. We'll discuss when to buy in due course, because companies first need to figure out how to articulate their opportunity. I keep asking: how are you going to price your products? There's no right model yet, and that has to change, because the market isn't ready.

If I show you an application, how should it be priced — on the number of hours it took to code, or on an outcome-based model? That's the change currently under way. The market has broadly resolved that there's no threat to the survival of technology, which is why most tech stocks are showing signs of bottoming.

The last earnings season showed that mid- and small-cap stocks are the real stars. FIIs also appear to be buying them instead of large-cap and Nifty stocks. Is this trend sustainable or a one-off?

Harendra Kumar: The GST cut measures have been a big success. People aren't giving the government enough credit. The traction has been strongest in areas where taxes have been cut, particularly automobiles and consumer discretionary. That momentum is continuing, and earnings should remain strong.

When crude, energy and other shocks occur, unorganised players tend to suffer. Earnings then move to organised players because they're less affected by supply-chain shocks — which also leads to higher tax collection. The market isn't fully appreciating this shift, but it's visible in the earnings.

The formalisation of the economy is helping the government collect more revenue, while earnings trends remain resilient. The data will show that earnings can continue to grow over the next eight quarters. This is a structural trend, not a one-quarter phenomenon, because consumer and market behaviour don't change overnight.

It seems you are bullish across the board.

Harendra Kumar: No, I'm cautious. I don't want to add banks. Banks will do relatively well, but not everything will perform equally well.

FMCG staples remain challenging. Volume growth of 3% to 4% is what one can expect, and that's the challenge. In legacy businesses, the number of players entering has increased and there's little product differentiation. Everyone is chasing rate and alternative opportunities — this is essentially an industrial product to which consumer characteristics were assigned.

From a retail investor's perspective, what allocation to small- and mid-cap stocks is appropriate at this stage?

Harendra Kumar: It depends on the investor's age. For a moderately aggressive investor with a 10-year horizon, one could allocate 40% to large caps and 30% each to mid and small caps. Alternatively, one could allocate 50% to large caps and 25% each to mid and small caps.

Up to the mid-cap segment, investors can tolerate some mistakes. Mistakes in small caps can be costly if the entry price is wrong. My only advice is: don't buy small caps at high valuations.

Are small caps generally trading at high valuations?

Harendra Kumar: You have to capture the cycles. After a two-year high, small caps corrected and valuations are now reasonable. If you enter now, you could see a strong sectoral cycle over the next seven to 18 months. If you enter later, you could find yourself in a deep swamp.

So it's not too late to enter the small-cap cycle?

Harendra Kumar: This is the beginning of the cycle. There is a tail, and one has to perform well at the top.

Besides banks and IT, which other sectors within the small- and mid-cap space are likely to do well?

Harendra Kumar: Power and capex. Power and capex will play a major role. The government is planning substantial investments in battery energy-storage systems and grid upgrades. If you have to run data centres or semiconductor plants, you can't afford even a five-second outage.

That's why battery storage systems are important. Our finance companies could do better than banks. The economy is entering a dynamic phase, with many new sectors and tools coming into play. If a company doesn't align with a new sector, its status quo will be challenged.

Power is in a global upcycle, not just in India. There are many power capex opportunities, although some companies are focused significantly on overseas markets.

Is the export opportunity much larger than the domestic opportunity?

Harendra Kumar: The domestic opportunity is far larger. The world's power sector is growing rapidly and there are strong players globally. The shift towards renewable energy is driving growth across wind, solar and nuclear.

Nuclear power, in particular, is a very long-cycle opportunity. It's beginning now and could represent a trillion-dollar opportunity over a 10-year cycle. India is going to grow faster than GDP and will become a major consumer of power.

There are also new structural tailwinds because of the government's household electrification and power initiatives. A production executive told me that solar is being installed, air conditioners are being added, scooters are being charged, and households are also supplying power back to the grid. Most people haven't understood this change — it's a major success.

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What about smaller sectors such as textiles and footwear?

Harendra Kumar: Indian companies are currently adding capacity incrementally — 10% or 12% — because of the free-trade agreements. No promoter has said they're going to triple capacity, but eventually someone will. For now, incrementalism continues. I'm disappointed, but at least companies are taking the first steps.

This could be a long cycle for textiles. People haven't understood that companies which previously couldn't sell in foreign markets now have an opportunity that's two or three times larger.

People are looking at FTAs only in terms of the tariff benefit. A European company may decide that, even to serve its own market, it should establish a plant in India, because it can export from India at zero duty. That will attract capital.

This FTA phenomenon creates opportunities that people aren't fully appreciating. India is opening markets, building ports for exports, lowering the cost of capital and improving power availability. These are the ingredients required for manufacturing.

Textiles and footwear are sectors in which India has a right to win. India has leather and labour, and leather production can be mechanised. When people say a product is handcrafted, it's often because it can't yet be mechanised — not because companies necessarily want to make it by hand.

All these sectors are likely to move, and they're concentrated in the small-cap space. Their growth rates can be faster without companies having to work disproportionately harder.

Fisheries has also performed well. The government has supported the sector through policy and continuous investment. Even in Chandigarh, there's shrimp farming — people haven't fully recognised the opportunity.

There's a lot of supply coming into the primary market through QIPs and IPOs. Could this repeat what happened in 2024, when supply pressure absorbed liquidity and the market went nowhere?

Harendra Kumar: There are pros and cons. I'm never happy to see an offer-for-sale component, but I am happy to see fresh capex in an IPO document. At the same time, an offer-for-sale and an exit allow a private equity investor to go back to overseas limited partners and say that exits have been achieved.

While one may view this as negative in the short term, because foreign investors are taking money out, it also creates a use case for more capital to come into India. A liquid market that can fund entrepreneurship is important. What looks like a short term capital account crisis may eventually prove positive.

If one private equity investor takes money out, other investors may still conclude that they can invest in India and have no difficulty exiting 10 years later. The promise of liquidity is important.

We shouldn't base policy decisions solely on the short term market crisis. The current supply is weighing on the market, but over the long term these developments are positive signals for foreign investors. They will invest in new start-ups, and those start-ups will eventually get listed. This creates a base for fresh capital and, in some cases, keeps valuations in check.

As valuations remain in check, the cost of capital in India is falling because of the surplus savings pool. That can support higher price-to-earnings multiples, but only when accompanied by growth. Valuations remained elevated without sufficient growth for the last few years; the cost of capital continues to fall because there's so much liquidity.