PhillipCapital sees GDP at 7.5% and a Nifty at 27,500, but the real story is where earnings are actually going to show up
In dealing rooms in Mumbai, everybody has their fingers crossed. The war in the Middle East is keeping oil traders on edge. Geopolitical alignments that held for decades are shifting. AI is repricing entire sectors before its earnings impact has even shown up in quarterly results. And nobody has cleanly priced in what happens if the disruption in oil supply is not temporary. But despite this, stock markets have been showing resilience, holding on, and not panicking. A few investors have even started to take the long view.
“We remain optimistic on the Indian economy and equities,” PhillipCapital notes, “buoyed by incremental positives such as trade deals, lower taxes and interest rates, higher earnings, supportive government policies, new set of reforms, and an improved global standing.”
No doubt, the macro foundation is strong. India is forecast to grow at 7.2–7.7% in FY27 against a global growth rate of just 3.1–3.2%. Inflation is expected to inch to 3.7–4.2%, keeping the RBI on hold — no rate cuts are coming.
“Bond yields will remain elevated due to high bond supply from the centre and states,” PhillipCapital noted, a reality that continues to compete quietly with equities for institutional money. On the currency, the firm expects “greater stability ahead,” suggesting the worst of the rupee’s depreciation is likely behind us. That removes at least one layer of anxiety for investors.
The oil risk? The US-Israel-Iran conflict hangs over every model. “Lasting supply constraints will be a negative for GDP and earnings,” PhillipCapital warned, adding that constrained oil supply remains “a risk, not factored in our numbers yet.” The base case assumes short-term disruption and eventual normalisation.
The Nifty
PhillipCapital forecasts Nifty earnings growth at 5% in FY26, accelerating sharply to 17% in FY27 and 14% in FY28, with a target of 26,500–27,500 by March 2027. At 16.6x two-year forward PE, valuations are reasonable but not cheap enough to expect a sharp re-rating.
“Returns could be tepid in the near-term, but more attractive in the long-run,” the firm noted, adding that “strategies of churning and buy-on-dips will aid alpha creation.” This is a market that rewards patience and precision.
On foreign flows, “FII inflows, if they happen, would be an added positive, although Indian valuations may not yet be as compelling as other markets,” said PhillipCapital. In their continued absence, domestic institutions have quietly become the market’s primary anchor. “DIIs now hold more of Nifty-500 than FIIs,” PhillipCapital noted — a structural shift that has changed how this market moves and what drives it. The firm also points out that “the value style has consistently outperformed in recent years.”
What is Smart Money Doing?
Capital goods is the standout. It has been for a while, and PhillipCapital sees no reason for that to change. Defence follows closely, driven by sustained government spending and a pipeline of orders that extends well beyond any single budget cycle. Cement and automobiles are also in the firm’s preferred column — both beneficiaries of domestic demand and infrastructure activity that continues to build quietly in the background.
But the more interesting calls are the ones that involve a change of direction. “Two sectors where earnings growth is likely to improve meaningfully in FY27-28 — banks and FMCG,” PhillipCapital noted. Both have underperformed expectations for different reasons.
The sharper warnings sit elsewhere. “IT sector earnings could be downgraded,” PhillipCapital said — a pointed signal in a sector that still commands premium valuations and significant index weight. Pharma earnings “will remain weak in FY27.” And the firm has cut exposure to oil and gas given the ongoing conflict overhang. But the near-term pressures on these sectors includes earnings pressure increasing.
“We retain our constructive stance on equities,” PhillipCapital noted.
