Indian equities face headwinds but Q2 FY27 earnings set for 11-quarter high, says Motilal Oswal
Nifty 50 projected to post 27% earnings growth, its best performance in 17 quarters, Motilal Oswal says
Indian equities face headwinds from global uncertainty, geopolitical tensions, high crude oil prices, and significant foreign institutional investor outflows. However, corporate earnings are poised for their strongest growth in nearly three years, according to a quarterly strategy report by Motilal Oswal Financial Services (MOFSL).
The report anticipates aggregate earnings for its 399-company universe to surge 22% year-on-year in Q2 FY27, marking the highest growth in 11 quarters. Excluding oil marketing companies, growth is projected at 24%, a 12-quarter peak. The Nifty 50 is expected to record 27% earnings growth, its best performance in 17 quarters. Industries like financials, metals, oil and gas, and telecom are expected to lead the recovery.
Growth is expected to be broad-based, with large-caps projected at 23% profit after tax (PAT) growth, mid-caps at 11%, and small-caps at 29%. Looking ahead, MOFSL projects Nifty 50 PAT growth of 17% in FY27 and 13% in FY28. The market has become relatively cheaper, with large- and mid-cap valuations down 31% and 36% from their peaks, and the Nifty 50 trading 18% below its long-term average price-to-earnings multiple.
While the enhanced risk-reward situation could warrant selective stock-picking, MOFSL cautions that sustained rally prospects depend on global interest rates, FII flows, and crude oil prices.
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