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Informist, Monday, Jun. 22, 2026

MUMBAI – Overall consumer demand is likely to take a hit in Oct-Mar as the benefits of the goods and services tax cut are likely to have faded, while the El Nino event is expected to affect farm output and in turn hurt rural consumption, Nuvama Institutional Equities said in a report. Weak income growth will also continue impacting capital expenditure, Nuvama said.

Nearly two-thirds of India Inc.'s top line is directly or indirectly linked to global trade. Though undervalued rupee and global capex for artificial intelligence are likely to offset some of the negative impact, they are "insufficient" to accelerate earnings growth, the brokerage said.

The top line growth of Indian corporate rebounded in the second half of 2025-26 (Apr-Mar) but the impact of the West Asia war is likely to weigh on the Apr-Sept earnings, the brokerage said. While the brokerage expects the war's impact to ease out in the second half of FY27, the net profit growth of 500 companies on the BSE, excluding oil marketing companies, is likely to miss the consensus estimate of 19% growth in FY27, with the continuation of earnings downgrades, it said. "The BSE500 wage bill growth has been stuck around 6–7% YoY range for quite some time," it said.

Indian companies are still "expensively" valued with a market capitalisation to GDP of 130%, above the 10-year average of 100%, according to the brokerage. The trailing price-to-earnings median is 30 times, higher than the 10-year average of 25 times. On a price-to-sales basis, the industrial sector now trades at a premium to information technology companies, despite large free cash flow yield gap and top-line growth of 10–12%, Nuvama said.

Metal companies trade at a more expensive valuation than private banks on a price-to-book basis. Fast-moving consumer goods companies have a higher dividend yield than power companies with low growth in both. "Such extremes were last observed in the 2007 peak and Sept-24 peak," Nuvama said. "If the focus shifts from supply side to demand side, then these should normalise," it added.

The supply-side concerns are likely to ease if the US signs a deal with Iran. Given the weak demand outlook, Nuvama expects high-dividend yield sectors, less cyclical, and exporters to outperform, while expensive cyclical sectors to underperform. The brokerage expects the net profit of Grasim Industries to grow at a compound annual growth rate of 74% over FY26-FY28, highest among the large-cap companies under Nuvama's top 10 picks. The company had reported a 46% fall in net profit compound annual growth rate over FY24-FY26. 

Shriram Finance, Tech Mahindra, Nestle India, and Reliance Industries are expected to report a compound annual growth rate in net profit of 35%, 23%, 19%, and 13%, respectively, over FY26-FY28, according to Nuvama's estimates.  End

Reported by Simran Rede

Edited by Akul Nishant Akhoury

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