Domestic Demand Revival Spurs Earnings Upgrades; Nifty Seen Approaching 29,000: PL Capital
India is entering a renewed phase of earnings upgrades, driven by robust corporate performance, strong festive-season demand and supportive government policies, according to PL Capital’s latest India Strategy report. After five straight quarters of downward revisions, Nifty earnings estimates have finally moved higher—up 0.7% for FY26, 0.9% for FY27 and 1.3% for FY28—signalling a clear shift in market sentiment. The Nifty has already gained 4% over the past three months, breaking out of its consolidation range amid stronger Q2 results, improved domestic consumption and expectations of easing tariff tensions with the US. The September 2025 GST rate rationalisation, which cut levies by 5–10% across key consumer categories, further boosted spending across both rural and urban markets.
With valuations staying near long-term averages, PL Capital has set a 12-month Nifty target of 29,094, backed by its 15-year average P/E of 19.2x and a September 2027 EPS estimate of 1,515. The firm remains overweight on banks, healthcare, autos, consumer goods and defence, while maintaining underweight positions in IT, commodities and oil & gas. Corporate performance in Q2FY26 surpassed expectations, with companies reporting 8.1% sales growth, 16.3% EBITDA growth and 16.4% PAT growth. Key outperforming sectors included hospitals, capital goods, cement, NBFCs, EMS and telecom. Government capex has already reached 52% of the FY26 target—well ahead of last year—though PL Capital warns of potential moderation due to budget pressures from GST cuts, fertiliser subsidies and lower direct tax receipts.
Festive demand surged across categories, lifting auto and jewellery sales to record highs during Diwali 2025. Gold and silver purchases touched ₹0.7–1 trillion, while passenger vehicle sales accelerated after GST on small cars was reduced from 28% to 18%, pushing September sales to 5.49 lakh units. Despite global challenges—including 50% US tariffs on select Indian goods—India’s services exports rose 12% year-on-year in October to $38.5 billion, helped by the rapid expansion of Global Capability Centers. With demand strengthening, earnings upgrades resuming and macro indicators staying resilient, PL Capital says India is poised for a new and sustained growth cycle extending through FY27 and beyond.
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