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India Q1 earnings beat expectations, but revival faces headwinds
Despite India’s MSCI India index rising 3% over three months, the market remains down 2.6% year to date, and analysts warn oil volatility and rich valuations could limit earnings momentum.
Investor sentiment toward India has weakened despite a recent lift in broader equities, with the MSCI India index up 3% over the past three months. LiveMint Markets notes the index is still down 2.6% so far this year and has lagged key Asian peers, according to an August BofA Securities fund manager survey that named India the least favoured stock market in Asia.
The optimism has been supported by India’s Q1FY27 corporate results, which LiveMint Markets describes as a silver lining amid broader market gloom. Nomura Global Markets Research said Nifty 50 companies posted 4% year on year earnings growth, exceeding consensus estimates by 1%. Nomura also found that among 256 companies it tracks, normalised profit after tax grew 6% year on year and beat consensus by 12%.
Excluding oil and gas, LiveMint Markets reports normalised earnings growth accelerated to 20% year on year, surpassing Bloomberg consensus estimates by 5%, after losses booked by oil marketing companies dragged the segment. Still, the outlook is clouded by the report’s emphasis on a swing factor for India’s macro picture, crude oil prices, given India’s status as a net oil importer.
Looking ahead, LiveMint Markets says consensus projections call for steep FY27 earnings growth of 19% for BSE500 companies and 16% for Nifty 50 companies, while FY28E earnings per GDP is elevated at 10.9%, according to Nomura. The article argues that sustaining earnings growth above nominal GDP growth likely requires a stronger investment cycle and improvement in domestic manufacturing activity, in addition to any cushion from tax cuts, monetary easing, and benign interest rates.
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