India's first-quarter FY27 earnings season delivered the strongest growth since June 2024, with the Nifty 50 delivering revenue and PAT growth of 20% and 12% YoY respectively, while EBITDA margins expanded by 2 basis points. According to JP Morgan, the 19% increase in revenue and 16% rise in PAT across MSCI India came with a 10-basis-point expansion in EBITDA margins, excluding oil marketing companies. The earnings performance was materially better than the 10% YoY growth reported in the fourth quarter of FY26. Nomura reports that for Nifty 50 companies, year-on-year earnings growth was 4%, exceeding consensus estimates by 1%, though the figure was distorted by oil price movements and one-off items. The broader market also delivered stronger performance, with Nomura's analysis of 256 companies in the BSE 200+ universe showing reported PAT growth of 3% YoY, while normalised PAT rose 6%, both figures beating consensus estimates by 8% and 12% respectively. The Nifty Midcap 100, excluding Energy, recorded 42% YoY PAT growth, while the Nifty Smallcap 100 posted 39% YoY PAT growth, demonstrating broader strength across market segments.
While India's Q1 earnings season delivered exceptional results, Jefferies warns that valuations remain expensive despite the strong performance. According to Mahesh Nandurkar, MD and Head of India Research at Jefferies, the growth broadened out across financials, autos and consumption, pushing earnings upgrades to their highest ratio in five years. However, he emphasized that "What has happened in this quarter is really a positive surprise. This is coming in despite the fact that the June quarter was marked by the tensions in the Middle East and the oil prices going up, the gas shortages, and all that." Indian equities are trading at around 20 times forward earnings for the broader market, with midcaps pricier still. Compared to the MSCI Emerging Markets index, Indian stocks now carry close to a 100% premium — meaning investors are paying roughly double what they'd pay for similar emerging-market exposure elsewhere. Nandurkar noted that "At the market level, we need to stay selective. The broad-based improvement in the economic performance and the corporate performance doesn't necessarily mean that the market as a whole is going to do that well going forward."
Foreign investors' persistent selling in Indian financial stocks could be nearing a turning point, according to JPMorgan, which expects the segment to perform better as geopolitical pressures ease and valuations become more attractive. Rajiv Batra, head of Asia & co-head of global emerging markets equity strategy and chief India equity strategist at JP Morgan, told NDTV Profit that financials could see stronger performance as the war subsides, while a reversal in foreign portfolio investor outflows would provide an important catalyst for Indian markets. Financial stocks have remained under pressure as foreign investors have consistently reduced exposure to the sector, but JPMorgan expects the outlook to improve with better valuations and the possibility of higher credit growth providing support. Batra said the brokerage expects much higher credit growth for financials, while also seeing scope for better valuations across the segment.
JP Morgan sees artificial intelligence and data centres becoming an important source of incremental electricity demand in India, with the report estimating that data centres, AI and electric vehicles could add around 30GW to peak power demand. The brokerage cited Hitachi Energy, GE Vernova, T&D, ABB and NTPC in connection with this trend, citing the significance of data centres requiring large and reliable electricity supplies which in turn require generation capacity, transmission infrastructure, grid equipment and electrical systems. The report also estimates current peak power demand at around 271GW, adding to the case for continued investment in generation and transmission. Within MSCI India, Materials, Utilities, Industrials and Discretionary reported high earnings growth, with management teams focused on profitable expansion rather than chasing volumes at any cost.
Jefferies maintains a selective approach despite strong earnings, with its top ideas being power utilities, real estate, and select ports and airports. The brokerage sees the "real asset" or "hard asset" theme as its big call, while IT services has been downgraded to neutral in the past couple of months. Nandurkar expects that the performance gap between large-cap and mid/smallcap stocks will narrow over FY27 and FY28, largely because of banks. He noted that the banking and NBFC space is one of the few large-cap pockets where earnings are improving and valuations still look reasonable. JP Morgan expects India's earnings to grow 11% year-on-year in FY27 and accelerate to 15% in FY28, with the Nifty 50 target of 27,000 and a 30,000 bull-case target. The 58% beat-to-24% miss ratio for MSCI India and 64% to 20% ratio for the Nifty 50 point to relatively healthy earnings distribution, with 51% of large caps beating estimates, compared with 42% of small caps and 41% of midcaps.
The improvement in earnings has not removed the pressure from the external environment, with companies repeatedly referring to a two-sided macro backdrop including Middle East conflicts, crude oil prices, disrupted shipping and logistics, higher input costs, tariffs and trade-policy uncertainty. On the domestic side, companies continued to see support from GST 2.0 rate cuts, income-tax relief, strong tax and GST collections and sustained government capex. The monsoon remains another important variable, with management teams describing a weak start to the southwest monsoon followed by a recovery through July. JP Morgan sees the possibility of a comeback in Indian equities as earnings momentum strengthens, with the brokerage maintaining its positive outlook on the Indian market's relative performance trajectory. The key watchpoint remains whether foreign selling in financials reverses alongside stronger credit growth and improving earnings, while the 16.7% growth requirement for the remaining nine months of FY27 presents a particularly demanding challenge that Metals, Autos, NBFCs and Telecom sectors must address to meet full-year forecasts.
