India's economy entered July on a relieving note as energy supply pressures began to ease after the West Asia shock. The government lifted temporary restrictions on petrol and diesel sales to commercial users from July 1 after reviewing the supply situation and easing tensions in West Asia. Commercial LPG prices were cut by ₹183.50 from July 1, offering relief to restaurants, hotels and other businesses. However, OMC underrecoveries mounted to ₹2.19 trillion on petrol, diesel and LPG sales till June 30, despite the relief measures. As per Business Standard, India imported record crude volumes of 4.93 million barrels per day in June despite West Asia tensions, with Russian oil continuing to dominate the import basket.
India's equity markets are entering a crucial earnings season with Brent crude falling below $70 per barrel and the rupee stabilizing, according to Aditya Kondawar from Complete Circle Consultants. However, the IT sector continues to face headwinds from artificial intelligence uncertainties and slowing growth. As reported by The Economic Times, Kondawar noted that the IT sector has experienced an extended period of valuation correction, with the sector going through a phase of derating, negative news, and conflicting narratives around AI deployment. Prashant Jain from 3P Investment Managers believes the current pricing environment is cyclical and could improve as enterprises increase technology spending to adopt artificial intelligence. The latest developments show that initial Q1 updates point to far better resilience than expected during the US-Iran war, with companies that were meant to report weak numbers instead showing they absorbed the shock better than analysts modelled.
Despite near-term challenges, Kondawar believes KPIT Technologies' valuation has compressed significantly from its historical average. The automotive software major's seven-year, eight-year average PE is closer to 50, while the stock currently trades at a PE of 22. According to The Economic Times, while KPIT has guided for around a 1% decline in dollar revenue, the sharp rupee depreciation over the past year supports earnings in rupee terms. Kondawar projects KPIT could report a 50% jump in net profit from ₹600 crore to ₹900 crore over the next two-three years. However, Jain cautioned that Indian IT stocks continue to face valuation pressure from cheaper global peers, with similar businesses outside India trading at 20-30% lower multiples. The AI trade itself is under fresh scrutiny, with comments from Palantir's chief executive adding to growing questions over whether the AI trade is running ahead of itself, filtering through to how investors price the entire theme.
Brokerage estimates, including those from JPMorgan, project KPIT's profit after tax to reach around ₹920-930 crore by FY29. As reported by The Economic Times, Kondawar explained that these forecasts assume the first half of FY27 remains challenging before business momentum gradually improves from H2 FY27. The current weakness is primarily attributed to slower demand from key automotive clients BMW and Volkswagen, both facing operational challenges in Europe. Projects concluding currently are expected to be replaced by new programmes supporting growth recovery. Jain believes several factors could unlock value in Indian IT stocks over time, including potential earnings surprises, continued foreign selling reduction, and domestic investor support.
According to ET Now, Rohit Seksaria from Sundaram Mutual expects banks and NBFCs to lead a market rebound as crude oil correction eases inflation and currency concerns. He highlighted system-wide credit growth running above 17% and healthy asset quality across segments including microfinance, with stabilizing net interest margins. The clearest signal comes from the boardroom, with early updates suggesting lenders are holding up well on credit growth and asset quality, and if this trend holds through the reporting season, banking stocks could lead the market's next leg up. For a sector that carries the heaviest weight in the index, this matters more than any single headline number. Seksaria noted that Nifty earnings growth projections of around 15% for the year will likely see downgrades due to elevated raw material costs from oil and petrochemical complex hitting margins in Q1 and part of Q2, but expects this to be a one-off disruption rather than structural.
Beyond banking, Seksaria flagged several thematic opportunities including data centres, hospitals within pharma, niche IT players in engineering technology and quick commerce, and select auto ancillary companies. According to The Economic Times, Kondawar remains constructive on India's consumption story, particularly automotive, auto ancillary companies, and agile consumer businesses. He highlighted strong vehicle sales growth across leading manufacturers including Mahindra & Mahindra and Maruti Suzuki, alongside robust guidance from component makers. Jain drew a clear distinction between consumer staples and discretionary businesses, preferring consumer discretionary space over staples due to slower growth and increasing competitive pressures in staples despite strong business quality. The next big swing factor is weather, with the market's working assumption that a strong monsoon from here will make up for the deficit recorded in July, which would support rural demand and consumption-linked earnings into the second half of the fiscal year.
