Nifty-50 net profit projected to grow 18% in FY27 and 13% in FY28 amid macro headwinds: Kotak report

Net profits of the Nifty-50 Index is projected to grow 18 per cent in FY2027E and 13 per cent in FY2028E, even as geopolitical strains, elevated crude oil prices, and macroeconomic pressures weighed on investor sentiment, according to a report by Kotak Institutional Equities.

Net profits of the Nifty-50 Index is projected to grow 18 per cent in FY2027E and 13 per cent in FY2028E, even as geopolitical strains, elevated crude oil prices, and macroeconomic pressures weighed on investor sentiment, according to a report by Kotak Institutional Equities. “We expect earnings of the Nifty-50 Index to grow 18% in FY2027 and 13% in FY2028E,” the report stated.

The report mentioned that early corporate earnings for the second quarter of the financial year delivered positive surprises. Second-quarter net profits of the Nifty-50 Index stood 1.7 per cent above brokerage estimates and registered a 19 per cent increase compared to the corresponding period of the previous year. Across the broader Kotak Institutional Equities coverage universe, net profits tracked 5 per cent above estimates, advancing 22 per cent year-on-year based on results declared so far. "Earnings downgrades were a major reason for the market's weak performance over FY2025-26, and investors are justifiably nervous about downgrades given the challenged macroeconomic situation," the report said.

"We draw comfort from limited downgrades to FY2027-28E earnings in the past few months and strong 1Q/2QFY27 results," the report added. The report identified three potential triggers required for the domestic market to overcome its current weakness: a durable resolution to the conflict alongside normalization in crude prices, solid earnings prints to reinforce outlook visibility, and a behavioural pivot from price tracking to valuation metrics.

"We believe that a greater focus on the favourable price-value gap in more stocks after the sharp correction in recent weeks will help dispel the 'gloomy' mood in the market," the report noted, adding that valuations cooled considerably across sectors to leave multiples at reasonable levels. The report pointed out that geopolitical friction and energy volatility shifted market dynamics away from small and mid-cap shares toward large-cap counters.

"The stalemate in the Iran-US war, high and rising crude oil prices and related macro headwinds may have punctured the euphoria in the SMID segment of the market and pushed investors to look at the large-cap segment more favourably, given the reasonable value in many large-cap stocks," the report stated. Addressing the broader economic backdrop, the report highlighted persistent friction on the external and domestic fronts.

"We do not see any immediate relief for India's challenged macro, given the complete stalemate in the Iran-US war with no progress on 'peace' talks, growing risks of further escalation with Iran and Israel-US potentially using military options to force concessions from each other in any future negotiations and domestic headwinds from deficient monsoons," the report noted. It added that crude prices maintained a significant bearing on key macroeconomic metrics, with elevated energy costs exerting disproportional pressure on the economy. (ANI)