Sanjeev Prasad, Managing Director and Co-Head of Kotak Institutional Equities, expects the Nifty 50 to deliver around 17.5% earnings growth in the current financial year 2026-27 (FY27), according to reports from CNBC TV18. The growth is anticipated to be driven by resilient economic activity, healthy consumption and investment trends, and higher commodity prices. Prasad noted that the first-quarter earnings expectations have remained stable over the past several months, with the brokerage expecting 14% earnings growth next year, supported by a recovery in banks as net interest margin (NIM) pressure eases. Latest Q1FY27 results have shown Nifty profit growth came in at ~18% year-on-year, ahead of expectations, with earnings upgrades seen across consumer staples, metals and mining and retailing sectors.
According to Prasad's assessment reported by CNBC TV18, the earnings outlook has improved as economic activity remains resilient despite macro uncertainties linked to West Asia and crude oil prices. Consumption and investment indicators continue to hold up, while higher commodity prices are supporting sectors such as metals, mining, and oil & gas. Prasad emphasized that "at least the earnings outlook is looking a lot healthier," reflecting the overall positive market sentiment. However, margin pressure remains visible in autos, consumer discretionary and parts of staples, with a large part of incremental Nifty profit growth being driven by commodities, utilities and other global-facing sectors rather than broad-based domestic demand.
Despite the stronger earnings outlook, Prasad cautioned that valuations have become stretched, particularly in midcap and smallcap stocks after their recent rally, as reported by CNBC TV18. He advised investors to avoid focusing on marketcap classifications and instead evaluate businesses on sector fundamentals and valuations. Prasad maintained a negative stance on information technology stocks and said Kotak remains in the avoid camp, arguing that historical valuation multiples are becoming less relevant as artificial intelligence (AI) reshapes the industry. At current valuations, Prasad remains positive on financials and metals, with financials remaining inexpensive and metal stocks benefiting from stronger commodity environment, while remaining cautious on IT services due to uncertain demand and AI-related spending disruption.
According to Pratik Gupta, chief executive and co-head of Kotak Institutional Equities, large-caps, which underperformed small- and mid-caps owing to relatively lower earnings growth over several quarters, look set to capture investor attention in FY27, as reported by Mint. After a liquidity-driven rally over 2023-25, investors will pick stocks based on earnings performance in 2026-27, with large-caps likely to vie for investor interest with small- and mid-caps (SMIDs) due to compelling valuations and a slowdown in foreign investor selling. Gupta noted that large-caps have been rangebound but mid-caps and small-caps have relatively outperformed, with the weaker performance of large caps driven by slower earnings growth and sustained FPI selling over past quarters. Future returns are likely to be driven more by earnings than by multiple expansion, with large-caps expected to participate more meaningfully given their relatively more attractive valuations.
Regarding currency and monetary policy, Gupta expects USD-INR to remain range-bound within 93-96.5 for the rest of FY27, with the lower end factoring in room for appreciation if crude prices ease toward $75/bbl, and the upper end at risk if crude spikes further. The recent RBI monetary policy committee (MPC) minutes raise the probability of rate hikes above an extended pause, with a 50-basis-point rate-hike cycle possible from December policy based on continued inflationary risks. Gupta believes that recent FCNR inflows and other capital-account measures provide a useful buffer against external financing pressures, though they do not eliminate underlying sensitivity of India's balance of payments to crude oil prices. The Iran-US conflict and Strait of Hormuz risks remain key external risks for India's balance of payments and macro outlook.
