According to Emkay Global's Seshadri Sen, the Q1 earnings season demonstrated strong performance with topline growth recovering to 18.5% and Ebitda margins remaining resilient at 18.2%, supporting a 19.8% PAT growth. As reported by Business Standard, the dual combination of healthy revenue growth and stable margins suggests the earnings recovery is becoming more broad-based, with the worst of the earnings slowdown largely behind India Inc. The latest data shows India Inc's sales climb 18% YoY driven by resilient consumption and broad-based demand, with analysts expecting steady margin growth in FY27.
Despite the sector's strong recent performance, Emkay Global maintains a cautious stance on PSU banks heading into FY27. According to Sen's analysis, treasury profits, which contributed 6-21% of PBT in FY26, will fade and drag EPS growth to low single-digits, while RoEs are likely to decline. With limited RoA levers remaining and a risk of credit costs normalising, the firm sees limited room for further upside in PSU bank stocks despite their stellar run since Nifty's September 2024 peak.
While PSU banks face challenges, private banking stocks are experiencing significant momentum with Karnataka Bank jumping over 15% in August and DCB Bank, AU Small Finance Bank, City Union Bank, Kotak Mahindra Bank, IDFC First Bank, and Axis Bank gaining between 1-9% this month. As reported by Mint, this surge is driven by better-than-expected Q1FY27 earnings, improved asset quality with several banks reporting NPAs at multi-year lows, and the return of foreign investors and RBI's status quo on interest rates. Vinit Bolinjkar from Ventura notes that India's credit growth is running at 12-14% annually, with private banks best positioned due to strong lending practices, better technology, and retail-focused loan books.
As reported by Business Standard, materials led the Q1 earnings with 49.9% PAT growth, followed by telecom at 30.9% and financials at 22.7%. Materials benefited from firmer pricing and margin normalisation, while financials gained from higher credit growth and stable asset quality. Looking ahead to Q2, Emkay Global remains overweight on discretionary, real estate and industrials sectors, expecting stronger earnings momentum due to improving demand visibility.
According to Sen's analysis reported by Business Standard, the Nifty is set for its first annual fall in 2026 after a decade of positive calendar year returns, but the base case expects this decline to reverse barring external shocks. Harshal Dasani from INVAsset PMS highlights that the private bank index is breaking out of a cup-and-handle formation, reflecting sustained institutional accumulation. Experts recommend selectively betting on private lenders, with Dasani suggesting ICICI Bank for consistency, Axis Bank for margin-recovery leverage, HDFC Bank for patient capital awaiting post-merger acceleration, and Kotak Mahindra Bank with caution. Ravi Singh from Master Capital Services recommends HDFC Bank, ICICI Bank and Axis Bank as preferred picks for portfolio and long-term investors, emphasizing that the sector setup remains constructive despite potential near-term margin pressures.
