The global brokerage house Nomura believes that the positive trend in profits during the first quarter of fiscal year 27 will continue. According to the report, India Inc's profit in the first quarter of fiscal year 27 exceeded expectations.
For companies included in the Nifty 50 index, annual profit growth was 4%, which surpassed consensus forecasts by 1 percentage point. However, Nomura believes that the true operational figures are stronger than the overall numbers suggest, as they are distorted by the influence of oil price fluctuations and isolated events. Excluding these factors, profit growth is estimated at low double digits.
The broader market demonstrated stronger results. An analysis of 256 companies from the BSE 200+ universe (including stocks tracked by Nomura) showed that the reported year-on-year net profit (PAT) growth was 3%, while adjusted net profit, excluding extraordinary items, increased by 6%. Both these figures exceeded consensus forecasts by 8% and 12% respectively.
The oil and gas sector had a significant negative impact on aggregate profit, as losses from oil marketing companies amounted to about 4% of the total profit pool in this universe. Nomura noted, however, that almost all the overall forecast beat was driven by the finance and metallurgy sectors. Revenue growth of 17% (excluding the oil and gas sector, metals, and financial services) reached a 12-quarter high, although this growth was partially offset by a 122 basis point margin squeeze.
Despite a strong quarter, profit forecasts have become somewhat moderated. Bloomberg's consensus forecasts for the BSE 200+ universe were lowered by 3.7% for 2026 compared to fiscal year 27, while forecasts for fiscal year 28 remained largely unchanged. Overall profit during the earnings season also remained stable.
What could support profit momentum?
Saion Mukherjee and Akshay Rajgarhia from Nomura believe that the sustainability of corporate profits is supported by cyclical favorable factors such as tax reductions and monetary policy easing, including liquidity injections and interest rate cuts. Nevertheless, they warn that these factors are already sufficiently reflected in current consensus expectations.
The broker sees key factors that could support profit growth above nominal GDP growth: a significant revival of the investment cycle and activity in domestic manufacturing. On the other hand, persistently high crude oil prices and geopolitical tensions remain major risks, as they could reduce corporate profitability and slow down the recovery of investment activity.
Commenting on Nifty index valuations, Nomura reported that the index is currently trading at an 18.1x Price-to-Earnings ratio based on forward one-year earnings, which is close to the lower end of the 18–22x valuation range observed over the last four years. The broker set a target for Nifty 50 for March 2027 at 25,900, based on an 18.5x forward one-year earnings multiple.
The broker maintains a positive outlook on auto components, machinery/manufacturing, and pharmaceuticals. Furthermore, it remains optimistic about financial services and IT services, given that, in their view, these sectors have attractive valuations. At the same time, it maintains a cautious stance on the consumer sector.