Investors have demonstrated strong preference for domestic economy-focused sectors during the first half of FY27, according to data from ACE Equity. Nifty Realty, Nifty India Defence, Nifty Pharma and Nifty Healthcare indexes gained up to 30% during this period, while Nifty Metal surged nearly 14% and was among the top gainers. The strong performance was driven by a combination of robust domestic demand themes and government policy support across these sectors. As per Equinomics Research, a strong domestic demand theme, coupled with the government's focus on sourcing defence products locally and sustained growth in pharmaceutical exports helped these sectors perform better. Recent market analysis suggests that defence stocks have shown an ecosystem with down and upside potential ranging from -39% to plus 37%, indicating the sector's continued volatility despite structural tailwinds.
The outperformance was significantly supported by government initiatives and policy changes. Defence sector gains were bolstered by a ₹7.85 trillion budget allocation, with order books converting to revenue and supply discipline in metals contributing to positive sentiment. Pharmaceutical exports benefited from sustained growth and a record-low rupee, while metals gained from renewed focus on domestic manufacturing and their nature as import substitutes. According to Equinomics Research, these factors helped improve sector realisations and performance. As noted by INVasset PMS, order books converting to revenue in defence, where the index is up nearly 30% since April, supply discipline in metals and a record-low rupee lifting pharma exporters were the key reasons that lifted sentiment in the outperformers.
Morgan Stanley remains bullish on India's residential real estate market, with July-August data showing sales growth, firm pricing and slower inventory accumulation across the top six cities. The investment bank is positive on three of the five developers in its comparison, with Godrej Properties, Prestige Estates and Lodha Developers carrying 'Overweight' ratings. The five developers tracked by Morgan Stanley - DLF, Prestige Estates Projects, Godrej Properties, Oberoi Realty and Lodha Developers - accounted for 32% of the estimated FY27 pre-sales of ₹1.31 lakh crore. Sales value across the top six cities grew 7% year-on-year in July-August, while sales volumes rose 2%. Prices increased 14% in July and 8% in August, while inventory growth moderated to 15% year-on-year from 18% in the first half of calendar 2026.
Godrej Properties leads with the largest FY27 pre-sales estimate at ₹39,000 crore and has the strongest starting position, tracking ahead of its target in the first five months of FY27. The company trades at 8.9 times forward price-to-earnings and 7.6 times enterprise value to earnings, the lowest multiples in the comparison. Oberoi Realty follows with an FY27 pre-sales estimate of ₹34,000 crore, supported by an ₹8,100 crore Gurgaon launch and the upcoming Hamilton project with estimated sales potential of ₹8,000-9,000 crore. Prestige Estates has an estimated FY27 pre-sales target of ₹30,000 crore with the highest growth estimate at 17%, while Lodha Developers benefits from its strong Mumbai exposure with FY27 pre-sales estimate of ₹20,500 crore. DLF has the lowest estimate at ₹20,000 crore after a slower start to FY27, with the Hamilton project's ₹8,000-9,000 crore sales potential being crucial for its recovery.
Looking ahead, analysts suggest maintaining focus on domestic economy-focused sectors due to ongoing geopolitical uncertainties. Most sectors that performed well in H1, except realty and metals, are likely to continue performing well in H2 as demand factors remain conducive. However, challenges are expected in realty due to elevated land costs and cost-push inflation impacting construction costs, while interest rates may rise affecting realty demand. Morgan Stanley favours domestic cyclicals over defensives, with overweights on financials, consumer discretionary and industrial sectors, while suggesting investors remain selective in IT, auto and consumption sectors. As noted by Morgan Stanley, India's chief risks are largely external, including geopolitical tensions and a slowing global economy, with domestically concerns including weak farm productivity and capacity bottlenecks in the judiciary. The third quarter of FY27 is expected to be crucial as several large projects enter the market, with execution of these launches determining the pace of pre-sales growth across developers.
