Indian equity markets are navigating significant pressure from global uncertainty, geopolitical tensions, elevated crude oil prices and sustained foreign institutional investor (FII) outflows, but corporate earnings are on track for their strongest growth in nearly three years, according to a quarterly strategy report released by Motilal Oswal Financial Services (MOFSL) on Wednesday.
MOFSL expects aggregate earnings for its universe of 399 companies to grow 22 per cent year-on-year in the second quarter of FY27 — the highest in 11 quarters. Excluding oil marketing companies, growth is pegged at 24 per cent, an 12-quarter high. The Nifty 50 is projected to post 27 per cent earnings growth, its best performance in 17 quarters. Financials, metals, oil and gas, and telecom are expected to lead the recovery.
The gains are broad-based: large-caps are expected to post 23 per cent PAT growth, mid-caps 11 per cent and small-caps 29 per cent. Looking further ahead, MOFSL projects Nifty 50 PAT growth of 17 per cent in FY27 and 13 per cent in FY28.
Markets have also become cheaper. Large- and mid-cap valuations have corrected 31 per cent and 36 per cent from their peaks, with the Nifty 50 now trading 18 per cent below its long-term average price-to-earnings multiple. India’s premium over emerging markets has narrowed sharply to 35 per cent, against a long-term average of 72 per cent.
MOFSL said the improved risk-reward makes a case for selective stock-picking, though it cautioned that any sustained rally will depend on the direction of global interest rates, FII flows and crude oil prices.