India seems to be stepping into a long-anticipated phase of earnings upgrades, supported by robust corporate results, buoyant festive demand, favourable policy measures and an improving macro backdrop, according to PL Capital’s latest India Strategy.
After five consecutive quarters of downward revisions, Nifty earnings estimates have finally turned positive. Upgrades of 0.7 per cent for FY26, 0.9 per cent for FY27 and 1.3 per cent for FY28 mark a meaningful shift in sentiment and suggest that corporate recovery is gaining momentum.
Nifty has risen 4 per cent in the past three months, breaking out of a prolonged consolidation phase. PL Capital attributes this shift to stronger-than-expected second-quarter corporate earnings, improving prospects of resolving tariff tensions with the US, and a clear resurgence in domestic consumption during the festive and wedding season. The GST rate rationalisation introduced in September 2025, which lowered effective levies and reduced retail prices by 5 to 10 per cent across key consumer categories, has provided a significant boost to spending across both urban and rural India.
Valuations, too, appear constructive. Using a 15-year average price-to-earnings ratio of 19.2 times and a September 2027 EPS estimate of 1,515, PL Capital places the Nifty’s 12-month target at 29,094, with a bull-case projection of 30,548 and a bear-case estimate of 26,184.
The firm continues to prefer banks, healthcare, consumer goods, automobiles and defence in its model portfolio, while remaining underweight on IT services, commodities and oil and gas.
Corporate performance in Q2FY26 exceeded expectations across the board. Companies in the coverage universe recorded sales growth of 8.1 percent, EBITDA growth of 16.3 percent and PAT growth of 16.4 percent, with both EBITDA and PAT surpassing estimates. These stronger results have triggered the first upgrade in NIFTY EPS since August 2024.
Sectorally, hospitals, capital goods, cement, EMS, ports, NBFCs and telecom posted notable gains, while commodity-linked sectors such as cement, metals and oil and gas delivered profit expansions ranging between 33 and 58 percent.
On the fiscal front, the government’s capital expenditure — one of the primary engines of economic momentum in recent years — has already reached 52 percent of the FY26 target, compared with 41 percent in the same period last year. PL Capital cautions that the second half of the fiscal year may see moderation, given budget pressures from GST rationalisation, higher fertiliser subsidies and subdued direct tax collections. Nevertheless, domestic demand now appears better positioned to sustain economic momentum, supported by income tax reductions, a 100-basis-point drop in interest rates, a normal monsoon and inflation at a 12-year low.
Festive buying frenzy lifts auto, jewellery sales to record highs
Diwali 2025 delivered one of the strongest festive seasons in recent memory. Gold and silver purchases surged to an estimated ₹0.7–1 trillion during the festive period, buoyed by strong demand for coins, bars and lightweight jewellery.
Passenger vehicle demand saw a significant boost following the September 2025 GST reduction on small cars from 28 percent to 18 percent. Prices fell by 5 to 10 percent, accelerating purchases and pushing PV sales to 5.49 lakh units in September 2025. Tata Motors alone crossed the one-lakh-unit mark during the Navratri–Diwali window, posting 33 percent annual growth. Two-wheeler and tractor sales also strengthened on the back of healthier rural incomes and renewed festive enthusiasm.
Digital payments scaled unprecedented levels during the festive period.
Despite global uncertainties and the added pressure of 50 per cent US tariffs on select Indian products, India’s merchandise and services sectors have continued to demonstrate notable resilience. While merchandise exports declined 12 percent year-on-year in October, the slowdown in shipments to the US was partly offset by robust growth in markets such as the UAE and Vietnam.
Services exports continued to expand, rising 12 per cent year-on-year in October to reach a monthly record of $38.5 billion, driven by IT, digital services, and professional consulting
The rapid expansion of Global Capability Centers (GCCs), supported by tighter US H-1B visa norms, has further strengthened India’s services export landscape, the report said.
While global uncertainties persist, PL Capital concluded that India’s domestic economic landscape is strengthening at a pace not seen in several quarters. With earnings revisions turning positive, consumer demand accelerating across segments and macro indicators remaining resilient, the country stands on the cusp of a new growth and profitability cycle.
Market valuations remain close to long-term averages, offering a stable runway for the next phase of equity market performance. As policy support aligns with corporate vitality and household optimism, India’s economic trajectory appears well-positioned for sustained expansion through FY27 and beyond.