More Stories

Informist, Wednesday, Apr. 8, 2026

MUMBAI – HDFC Securities expects uncertainty in the global scenario to continue in the financial year 2026-27 (Apr-Mar) but they see India's macroeconomic fundamentals to be robust except the outlook on the upcoming monsoon season. They also see foreign institutional investors returning to the Indian equity market gradually and do not see them selling relentlessly in FY27. As for stock valuations, they said the recent correction due to the repercussions of the war in West Asia have made them reasonable.

"Foreign investors have been selling (Indian equities) for three reasons, one, they had a discomfort on the rupee depreciation, second, they were seeing more opportunities, particularly in the AI (artificial intelligence) trade outside India," Dhiraj Relli, managing director and chief executive officer of HDFC Securities, said in an event to share the broking firm's outlook on the market for FY27. "And third, they were having a valuation discomfort."

Relli said Indian equities were at a premium to the rest of the world and hence foreign investors pulled out their investments. "Now, out of these three concerns, two concerns are assuaged. One is that the rupee depreciation, we don't see a significant challenge there. Second is that the valuations are reasonable," Relli said.

Further, he said although India does not have a pure play in AI trade, if AI trade is to unwind in the rest of the world, the fund allocation will move to India, but it will take some time. "That's why we are saying they won't be selling aggressively, but it will take some time for them to come back to Indian markets," Relli said.  

"Last 18 months, we've seen price correction (and) time correction (in market), and that's why the valuations are now far more reasonable," Relli said. "We are not saying that we will have V-shaped recovery, we will have outstanding returns in the market. But expecting a 10-15% returns in FY27 is very reasonable and it's in line with the earnings growth," Relli said. Another official at HDFC Securities said if the war in West Asia ends now, there could be 12-15% returns from Nifty 50 in 12 months. The Nifty 50 Wednesday ended at 23997.35 points, up nearly 4% from the previous day after the announcement of a two-week ceasefire between the US-Israel and Iran.

On the rupee's depreciation, HDFC Securities said the down cycle has reached the fag end. The Indian currency was among the underperformers in 2025. Since the West Asia war began, the rupee has depreciated 4% as of Mar. 30, after which the Reserve Bank of India announced measures to curb its fall. On Wednesday, the rupee ended at 92.58 to the dollar.

The rupee is unlikely to depreciate sharply in FY27, which could help India attract foreign investments, said Varun Lohchab, head of institutional research at HDFC Securities. "Currency is a big variable in decision of FPIs investing in a country, and the currency drivers were looking weak in the last 12-18 months and FPIs (foreign portfolio investors) stayed away from the market. However, the rupee will stabilize in FY27," said Lohchab said. He sees equities more attractive than gold in India.

"We are entering a period where rupee is likely to behave better than what it has over the last 18-24 months," Lohchab said. The stabilisation of rupee will give confidence to FPIs to invest in India, he said. However, other factors such as energy prices and AI play in other equity markets will also play an important role in foreign investors investing in the Indian market.

HDFC Securities said public and private sector banks are trading at fair valuations right now. The brokerage has forecast 7-8% earnings growth for Nifty 50 companies in the last quarter of the previous financial year. Relli said domestic flows into the market will continue in FY27 while Devarsh Vakil, head of prime research, said that companies beyond small caps have a better balance sheet than before. Even though large investors control the Indian market, retail investors remain the backbone of the market, Vakil added.

EARNINGS OUTLOOK

The brokerage sees earnings growth of companies in FY27 at 10-12%, down from the initial growth expectations of 14-15%. "If war continues for some more time, and we continue to have a negative impact of crude oil prices in India, sustaining for over $100 a barrel on an average basis for FY27, then probably we will go to a single-digit earning growth," Relli said. The broking firm sees the earnings growth quality to be different on year-on-year basis as the participation would be far more broad-based. "...we'll see many more sectors and many more companies participating in the earning growth. Of course, it will have an impact at the lower base also...," Relli said.

The brokerage has a positive outlook on the consumer discretionary segment, saying that demand seems to have bottomed out in FY26. However, it added that uncertainty and inflationary pressures could defer recovery in demand. Since stocks in this sector are trading at high valuations, the brokerage's handful of picks include names such as Crompton Greaves Consumer Electricals, Swiggy, and Syrma SGS Technology.

HDFC Securities is overweight on industrial, infrastructure companies due to healthy demand, supported by capital expenditure focus reinforced in the Union Budget. The brokerage said private capex is improving gradually led by defence, manufacturing, and green energy sectors. Larsen & Toubro, NCC, Siemens Energy are the key stocks for the brokerage. It is also positive on the real estate sector and expects FY27 to be launch-heavy for most players, which will drive presales. Sobha Ltd. is a preferred choice of HDFC Securities.

The automobile sector appears attractive to the brokerage. It sees growth of automobile companies normalising in FY27 after a strong growth in the previous financial year. While premiumisation and electric vehicles are the growth drivers for this segment, supply chain risk may act as a drag, elevating input costs. Bajaj Auto, Mahindra & Mahindra, Hero MotoCorp., and Samvardhana Motherson are the brokerage's top picks.

HDFC Securities said that private and public-sector banks are now trading at fair valuations. Across the banking, financial services, and insurance sectors, its key picks are ICICI Securities, State Bank of India, Axis Bank, Multi-Commodity Exchange of India, and SBI Life Insurance Co. Power stocks, healthcare companies, information technology stocks, and consumer staples are also at comfortable valuations, the brokerage said.

HDFC Securities is underweight on chemical, oil and gas stocks, and pharmaceutical stocks. It sees input cost pressure on specialty chemicals due to rising crude oil prices with limited pass-through ability due to Chinese competition. Similarly, rising crude price due to the war in West Asia supports refining margins, but hurts marketing margins for oil marketing companies. Higher realisations will likely help upstream oil and gas players partly.  End

US$1 = INR 92.58

Reported by Gopika Balasubramanium, Suryash Kumar, and Eshitva Prakash

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2026. All rights reserved.