According to Sachin Bajaj, Executive Vice President and Chief Investment Officer at Axis Max Life, Q1FY27 was among the strongest earnings quarters in recent years with Nifty 50 revenue and profit growth reaching the high teens. As reported by Business Standard, the quarter was supported by healthy domestic demand, strength in commodities, financials, rupee depreciation benefiting exporters and a favourable base. Latest analysis from Nomura Global Markets Research confirms this strength, with Nifty 50 companies seeing 4% year-on-year earnings growth, exceeding consensus estimates by 1%. The recovery was not restricted to index heavyweights, with normalised profit after tax growing 6% year-on-year for 256 companies, beating consensus estimates by 12%. Excluding oil & gas, which was a significant drag due to losses booked by oil marketing companies, normalised earnings for this universe grew 20% year-on-year, surpassing Bloomberg consensus estimates by 5%. However, recent data shows India Inc's sales surged over 22% in the June quarter, but salary growth stayed below 9%, raising concerns about muted wages amid AI adoption and cost pressures.
As reported by Business Standard, the sectors that stood out were Financials, NBFCs, Metals, Telecom, and selected export-oriented segments such as chemicals and auto ancillaries. However, misses were in Oil Marketing Companies, Aviation, parts of Cement and consumer space. OMCs and Aviation was impacted by energy-market volatility, while some consumer and cement companies saw margin pressure from higher input costs. The latest sectoral performance shows consumer durables emerging as particularly strong performers with companies like Polycab and RR Kabel recording very strong revenue growth, while rural demand showed signs of improvement. Financials, especially NBFCs and smaller lenders, also surprised positively with improving collections, lower credit costs and stronger disbursements. According to Motilal Oswal Financial Services, metals and financials led the quarter, while OMCs dragged sharply due to huge input cost pressures from the war in West Asia. The diverging trend holds true across many key sectors, with sales growth higher than the increase in salaries and wages in manufacturing companies and electricity firms, and the starkest contrast was in the mining sector, where sales grew 40.83% and salaries and wages 1.04%.
The chemicals sector was an outlier in Q1FY27, registering robust revenue and net profit growth over the year-ago quarter with aggregate revenue growth in the 17-24% band largely led by higher realisations. According to Kotak Institutional Equities, Q1FY27 turned out to be another quarter with windfall benefits arising for several producers of chemical intermediates amid war-related price inflation. However, gains largely came from low-cost inventory amid sharp rise in raw material and product prices due to the Iran war, with benefits not expected to last in the near term due to higher cost of raw materials and weak demand. Operating profit margins expanded by about 240 basis points, though the gains were not uniform across the sector. High-value fluorochemicals, contract development and marketing organisation (CDMO), specialty ingredients, and nutrition players delivered strong beat-driven growth, while agrochemical exports, bulk commodities, and monsoon-dependent domestic formulations faced margin compression. However, sectors such as chemicals, paints and cement, which benefited from low-cost inventory and calibrated price hikes in Q1FY27, now face the full impact of crude-led commodity cost inflation in Q2FY27.
According to Bajaj's analysis reported by Business Standard, India's growth is likely to be driven by a combination of themes: financialisation, manufacturing, premiumization, and platform businesses. India continues to gain share in the global supply chain across sub-sectors like electronics, auto components and industrial manufacturing. This has been supported by Government incentives and policies, supply chain diversification, healthy domestic demand and import substitution. The manufacturing sector is identified as a long-term theme that will continue to gain traction, with focus on businesses with hard-to-replicate assets, pricing power, credible management teams and strong governance. Lower growth in wages has likely helped operational profits, where margins had come under pressure because of higher costs of raw materials, according to Sanjay Sinha, founder of asset manager Citrus Advisors. The second quarter may also see the momentum in earnings continue, with growth in wages remaining muted. However, weak incomes have led to subdued capex spending by households and the government, while credit multipliers remain subdued. Systemic credit growth is improving, but it is not translating into an adequate consumption push.
As reported by Business Standard, the key risks investors should watch are global geopolitical situation, tariffs, trade agreements and market access. Bajay noted that large-cap valuations remain broadly reasonable, but parts of the broader market are trading well above their historical averages. The current market environment suggests a degree of complacency toward risks around geopolitics, global growth etc., leaving less margin for error should expectations disappoint. Despite these challenges, the investment approach emphasizes focusing on fundamentals and remaining invested in structural growth stories while being selective about valuations and market timing. India is now the least-favoured stock market in Asia, according to the August BofA Securities fund manager survey, with weak economic growth, elevated valuations and lack of clear artificial intelligence exposure cited as reasons for this pessimism. A sub-par monsoon season could also hamper rural incomes and consumption while pushing retail food inflation higher, limiting the scope for steep earnings upgrades. Despite muted wage growth, demand should remain reasonably strong through Q2 and Q3, with the combination of supportive base and high wholesale inflation keeping reported topline growth elevated, though investors should not extrapolate the current 20% growth rate beyond Q4.
