Nifty earnings are likely to see a sharp acceleration in the second quarter of FY27, with broad-based growth expected across sectors, although margin pressures could remain a key concern, according to Bank of America India strategist Amish Shah.
BofA expects Nifty earnings to grow 18% year-on-year in Q2FY27, with Financials, Energy and Telecom likely to lead earnings growth. However, Healthcare and Staples could lag, with both sectors expected to report a decline in profits during the quarter.
Discretionary and Materials are expected to record the strongest earnings growth, helped by a favourable base. BofA expects Discretionary earnings to surge 303% YoY, aided by reducing losses at IndiGo and a 2.5-fold increase in Eternal's profit. Materials earnings are projected to rise 279%, supported by a low base at Grasim and stronger chemical and fibre earnings.
Metals & Mining, Telecom and Cement are expected to post earnings growth of 58%, 39% and 26%, respectively. Meanwhile, IT, Industrials, Autos and Utilities could report more moderate growth of 6-10%.
Healthcare earnings are estimated to decline 7%, largely due to negligible Revlimid revenue at Cipla and Dr. Reddy's. Staples could see a 1% decline, primarily because of ITC's earnings impact from the sharp cigarette tax hike. Excluding ITC, Staples earnings are expected to grow 16%.
Financials, Consumer Demand In Focus
BofA highlighted improving momentum in Financials, with loan growth reaching 20% YoY in September. Large private banks are expected to deliver 3-4% sequential loan growth excluding the impact of FCNR(B) deposits, while PSU banks could grow 2-3% and mid-sized banks up to 5%.
However, headline net interest margins could remain under pressure. Banks face optical pressure from elevated FCNR(B) deposits and liquidity mobilisation, while NBFCs could see higher funding costs. Asset quality remains broadly resilient, although rural and unsecured segments such as microfinance and gold loans need monitoring amid a weaker monsoon.
Consumer discretionary demand remains strong, with commercial vehicle volumes rising 36%, passenger vehicles 30% and two-wheelers 15% YoY. Tractors, however, remained an exception, with volumes declining 4%.
BofA Remains Constructive On Nifty
Despite margin pressures across Autos, Industrials, Financials and IT, BofA believes several previously highlighted risks are now reflected in valuations.
The brokerage therefore remains constructive on the Nifty into December 2026, while favouring private banks, NBFCs, Autos, Cement, upstream energy, regulated utilities, jewellery, quick commerce and EPC contractors.
It remains cautious on PSU banks, Insurance, Steel, downstream energy, Staples, Telecom, Healthcare, Industrials and IT.
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