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Informist, Tuesday, Jun. 2, 2026

 

MUMBAI – The earnings of Indian companies for the March quarter were decent but the June quarter is likely to be difficult due to headwinds caused by the West Asia war, Kotak Institutional Equities said. The earnings outlook for 2026-27 (Apr-Mar) looks good for now but might change if the West Asia war continues, it said. 

 

In Jan-Mar, the net profit of companies under the brokerage house's coverage rose 14% on year, higher than the estimate of 7.3% on-year growth. "Automobiles and components, banks, capital markets, construction materials, diversified financials, electric utilities, metals and mining, retailing and telecommunication communication sectors reported a strong double-digit growth in net profits," Kotak Institutional Equities said. The bottom line of the Nifty 50 companies was ahead of expectations as well. The adjusted net profit of the Nifty 50 rose 6.6% on year, above the expectation of 2.2% on-year growth, the brokerage added.  

 

Kotak estimates the net profit of the Nifty 50 index for FY27 and FY28 to grow 18% and 14%, respectively. This is after muted growth of 8% in FY26. The brokerage said that its estimates of robust recovery in FY27 may appear at odds with India's challenging macroeconomic environment, but this reflects the idiosyncratic composition of the net profits with the high share coming from global commodities, global services, and products and utilities. This is combined with the low base of FY26 for the financial sector, Kotak added. "Nonetheless, we do not rule out earnings downgrades in the domestic consumption sectors from longer-than-expected disruption to global oil and gas supplies and higher-than-expected input prices," it said.

 

The Indian market's performance over the next few months will depend on the outcome of the West Asia war, according to the brokerage house. A quick resolution could result in moderate negative impact on the country's macroeconomy and limited impact on earnings. "However, a prolonged crisis could result in a deeper negative impact on both the economy and earnings," it said, adding that valuations are on the higher side after pricing in a quick resolution of the West Asia crisis and a strong recovery in earnings. 

 

Kotak Equities said that the Indian market is trading at reasonable valuations on an absolute basis. A large number of consumer and investment sectors and stocks are trading at rich valuations. Kotak said the market is either choosing to ignore disruption risks to consumptions or is willing to extend the current favourable investment conditions in certain sectors in perpetuity. "However, the Indian market valuations do not appear as attractive on a relative basis given several other major markets trade at cheaper or similar valuations and are expected to deliver far stronger earnings growth," the brokerage added. 

 

Among sectors, it expects banks to deliver a better performance in FY27, led by a moderate increase in credit growth, net interest margins, and steady credit costs. The net interest margins of banks declined sharply in FY26. Non-banking financial companies are also expected to deliver strong growth in FY27 on the back of strong loan growth, steady net interest margins, and a moderate decline in credit costs, the brokerage said.  End 

 

Reported by Adhithya Aji 

Edited by Avishek Dutta

 

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