BofA Securities has cut its Nifty 50 earnings growth forecast for the second time in a row, reducing it to 8.5% for fiscal year 2027, down from 11% in early March and 14% pre-war levels. As per Mint, Amish Shah, head of India research at BofA Global Research, explained that the brokerage is now significantly below consensus at 15% year-on-year. The second cut comes after BofA's first reduction on March 2, 2026, immediately after the conflict began on February 27, 2026. Shah noted that with clear evidence of crude and commodity prices spiking, they are incorporating that impact into more accurate estimates.
Brent crude oil prices have surged by over 42% since the war broke out at the end of February, creating significant pressure on India's import bill as the world's third-largest crude importer. According to Mint, Shah explained that some energy infrastructure assets in West Asia have been affected by the war, and even if tensions ease, supplies are unlikely to return to pre-war levels soon, keeping prices elevated. Since the war began, the Nifty 50 and S&P BSE Sensex have slumped by around 9% each, while the Nifty Midcap 100 and Nifty Smallcap 250 have fallen by 8% and 6% respectively. Shah noted that if the conflict ends, there is scope for about a 15% upside from current levels, but if it drags on, there could be an 8% downside.
All other emerging markets are offering much better growth than India, and at cheaper valuations as well, according to Shah's analysis reported by Mint. Taiwan is clocking around 35% earnings growth, while Korea is delivering upwards of 100%, with China offering about 15-16% growth. Shah emphasized that on a return-adjusted-for-growth basis, the balance still tilts in favor of these emerging markets compared to India. Even if the conflict ends by the end of 2026, foreign flows are unlikely to turn meaningfully positive, though persistent outflows could ease with some reversal.
Despite the revised forecasts, the Nifty 50 index is currently trading close to long-term average valuations, with a potential resolution to the Iran conflict could trigger a 15% upside, as reported by The Economic Times. According to Shah's latest analysis, around 7% out of the 15% rally will come straight from valuation expansion immediately when the conflict ends, and the remaining 8% will be gradual through this calendar year. BofA has set Nifty target for December-end at 26,200, compared with its current level of 22,663. The brokerage expects the index to continue underperforming its emerging market peers due to relatively expensive valuations, while projecting opportunities within large-caps and select themes in the broader market after correction.
BofA has downgraded rate-sensitive sectors like mid-sized private banks, non-bank lenders, real estate, and automobile companies to 'underweight' from 'overweight' earlier, according to The Economic Times. The brokerage remains cautious on mass consumption plays, staples, and retailers, as well as capex-linked sectors such as steel, cement, capital goods, roads, and railways. BofA prefers themes around energy security—regulated power utilities, gensets, cables and transformers—along with beneficiaries of rate hikes such as large private and PSU banks, and segments of well-off consumption like travel and tourism, durables, and two-wheelers. The brokerage remains overweight in upstream energy, aluminium, and pharma, while remaining cautious on IT and downstream energy.
