India Strategy – All decks cleared for growth
Published on 25 Feb 2026
NIFTY has been hovering in a narrow band of ~5-6% from the last 9 months which indicates long consolidation amidst 9-9.5% cut in NIFTY EPS for FY26/27, global geopolitical uncertainties and uncertainty around tariff rated issues. However, green shoots are visible as India has done several trade deals (including USA and EU) and demand is showing initial signs of revival buoyed by low inflation, GST rationalization and cut in interest rates. Corporate performance has been resilient with sales/EBIDTA/PAT growth of 9.9/16.4/16.7% for our coverage universe, although we have seen a cut in NIFTY EPS of 2.9/1.7/0.7% for FY26/27/28 with 16.3% EPS CAGR over FY26-28. Trade deals with USA and EU will provide impetus to manpower intensive traditional sectors like Textiles, Gems and Jewellery, Marine, Leather and handicrafts and position India as manufacturing hub for auto components, data centers, defense, aerospace and consumables. We value NIFTY at 5% discount to 15-year average PE at 18.3x with Dec27 EPS of 1525 and arrive at 12-month target of 27958 (28814 earlier at 18.7xDec27 EPS). We remain overweight on Banks, Diversified financials, Healthcare, Consumer, Auto and Capital Goods/Defense as key themes to play. However, the impact of AI transformation, likely chances of El Nino and near bottom interest rates and inflation need to be watched out for.
