India's economic outlook remains broadly comfortable, with Q1 real GDP growth coming in at 7.8% year-on-year, reinforcing the strength of underlying economic activity. As per Jefferies' latest equity strategy note by Mahesh Nandurkar, the June quarter showed resilient economic performance, supported by an uptick in capital expenditure. However, nominal GDP growth at 10.3% fell below the level assumed in the government's fiscal calculations, creating some pressure on the fiscal headroom. This gap between real and nominal growth could make it harder for the government to maintain its fiscal trajectory without adjustments elsewhere, with the implied pressure on the fiscal deficit target estimated at around ₹560 billion. The latest data shows June 2026 quarter results were stronger than expected, while the share of companies seeing earnings upgrades reached 52%, the highest level in the past 10 quarters.
Jefferies maintains an overweight position on banks, power, metals, property and hospitals in its India equity strategy, according to the latest report by Mahesh Nandurkar. The brokerage expects nominal GDP growth to accelerate to 11.5-12% in FY27, up from around 9% last year. This improvement is anticipated to translate into stronger corporate earnings, with MSCI India earnings growth expected to improve to 14% in FY27 from 10% in FY26. The improving macroeconomic backdrop is strengthening the earnings outlook, but elevated valuations and heavy equity supply could limit broad-based market returns, as noted in the latest strategy report. However, corporate earnings momentum has already improved significantly, with companies excluding oil and gas and metals recording 18% year-on-year earnings growth in the June 2026 quarter - the strongest pace in 10 quarters.
Jefferies has identified seven buy-rated stocks across India's financial sector, spanning banking, non-banking finance, and insurance segments. The brokerage's picks include ICICI Bank, which is expected to deliver 15% loan growth and 13% core profit growth through fiscal 2029, with return on equity of 17% in fiscal 2027. ICICI Bank demonstrates industry-leading retail deposit growth of 15% year-over-year and strong asset quality trends, including in small and medium enterprise and unsecured loans. Jefferies expects 17% core earnings growth and 14% return on equity in fiscal 2027, with improving asset quality showing slippage ratio at 2.1% and credit costs stabilizing at 70-75 basis points. The brokerage has assigned potential upside of 24% to HDFC Bank, 35% to Axis Bank and 28% to SBI, reflecting strong growth expectations across the banking sector. Within the sector, Jefferies expects larger banks to deliver around 13% profit CAGR, with valuations looking reasonable after recent underperformance. The brokerage has set target prices of ₹1,700 for Axis Bank (implying 35% upside), ₹880 for HDFC Bank (24% upside), and ₹1,750 for ICICI Bank (22% upside).
Power is one of Jefferies' strongest sector preferences, with capacity additions and rising electricity demand supporting earnings visibility. The brokerage expects private-sector power generation to grow at a 9% CAGR between FY26 and FY30, compared with 4% for public-sector generation. Among utilities, Adani Energy Solutions has the highest target-based upside at 49%, with a target price of ₹2,060, while Torrent Power has a target of ₹1,780, implying 46% upside. JSW Energy has a target of ₹720, implying 39% upside, with Jefferies expecting JSW Energy to deliver an 18% EBITDA CAGR through FY29. Adani Energy Solutions could post 31% EBITDA growth annually on a compounded basis CAGR as its transmission pipeline, smart-meter rollout and energy-solutions business scale up. The brokerage expects JSW Energy to deliver an 18% EBITDA CAGR through FY29, while Adani Energy Solutions could post 31% EBITDA growth annually on a compounded basis CAGR.
Jefferies highlights Bajaj Finance as one of few large caps where earnings growth can exceed 25% over the next few years, with 21% return on equity. The firm forecasts 21% assets under management growth in fiscal 2027, supported by broad-based momentum across segments, and expects 15% annual premium equivalent growth with value of new business margin expansion of 140 basis points to 29%. Jefferies projects 15% gross premium growth over fiscal 2026-2029 and 24% earnings per share growth, with return on equity improving to 16% by fiscal 2029. The brokerage also notes Star Health & Allied Insurance, which posted a 40% year-over-year increase in fourth-quarter net profit as gross written premium grew by 17.8%. In the property sector, DLF, Lodha and Godrej Properties are Jefferies' top sector picks, with Jefferies expecting residential property value sales to grow 10-15% in FY27, while listed developers could maintain 15-20% sales growth.
MSCI India is trading at around 20 times one-year forward earnings, close to its 10-year average but at a sizeable premium to emerging-market peers. About 38% of the index weight trades more than 10% below historical valuation averages, while 31% trades more than 10% above them. The brokerage therefore sees stronger earnings as the main support for selected sectors rather than a broad-based market re-rating. Jefferies' preference remains concentrated in areas where earnings visibility is supported by credit growth, capacity additions, infrastructure spending, stronger commodity conditions and improving domestic demand. Non-defence government capex could decline by around 10% during the remainder of FY27, even with revenue collections broadly tracking expectations, according to Jefferies estimates. However, the brokerage sees some support from tax collections, with tax collections for April-July FY27 up 11% year-on-year.
