- Nuvama upgraded stocks including Amara Raja Energy, Sharda Cropchem, Exide, Kotak Bank, and IDFC First Bank
- Downgrades included Titan, Dixon Technologies, Bandhan Bank, ICICI Lombard, and ACC after Q1FY27 earnings
- India Inc's profit growth rose 22% YoY, with revenue growth at a four-year high of 19% in Q1FY27
Nuvama Institutional Equities upgraded a clutch of stocks including Amara Raja Energy & Mobility, Sharda Cropchem, Exide Industries, Kotak Mahindra Bank and IDFC First Bank to 'buy' following the June quarter earnings season, while downgrading names such as Titan Company, Dixon Technologies, Bandhan Bank, ICICI Lombard General Insurance and ACC.
The rating changes, detailed in the brokerage's Q1FY27 earnings review authored by Prateek Parekh and Priyanka Shah, come against the backdrop of India Inc's strongest quarterly profit growth in three years, with aggregate profit for BSE500 companies (excluding oil marketing companies) accelerating to 22% year-on-year.
Full list of rating upgrades
Nuvama upgraded the following stocks to 'buy': Sharda Cropchem, Amara Raja Energy & Mobility, Exide Industries, IDFC First Bank, Kotak Mahindra Bank, Voltamp Transformers, Supreme Industries, Astral, NMDC, Zydus Life, Godrej Properties, Gujarat Fluorochemicals and Welspun Living.
The brokerage also moved Escorts Kubota, Bharat Forge, KNR Construction, Symphony, Finolex Industries and Tata Power Co up to 'hold' from 'reduce'.
Nuvama has changed stance on a whole host of stocks after Q1FY27
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Full list of rating downgrades
On the downgrade side, Nuvama cut Bandhan Bank, ACC, Data Patterns, Hindustan Aeronautics, Dixon Technologies, Jupiter Life Line Hospitals and Titan Company to 'hold' from 'buy'. ICICI Lombard General Insurance was cut two notches to 'reduce' from 'buy', while Kaynes Technology was moved to 'reduce' from 'hold'.
On earnings, Sterlite Technologies, ACME Solar Holdings and V-Mart Retail saw the sharpest upward revisions to FY27 earnings-per-share estimates, while ACC, InterGlobe Aviation (IndiGo), Hindustan Petroleum Corporation and Bharat Petroleum Corporation saw the steepest cuts.
The broader earnings picture
Revenue growth for the same set of companies climbed to a four-year high of 19%, driven by a combination of a low base, rupee depreciation, elevated commodity prices and the lingering effects of last year's consumption stimulus, which included GST cuts and regulatory easing by the Reserve Bank of India.
Exporters, consumer-facing companies and commodity producers led the acceleration, while capex-linked sectors such as industrials and cement, along with the banking, financial services and insurance space, grew at a steadier 10-14%.
Profit growth broad-based despite oil shock
Profit growth held up even as an oil price shock pushed up input costs, with operating leverage and the use of low-cost inventory helping offset the pressure. Autos, FMCG and cement companies saw profit growth decelerate during the quarter, while banking, financial services and insurance, IT and commodity companies saw an acceleration.
Small and mid-cap companies outperformed large-caps for a fourth consecutive quarter, with SMID profits rising 28% year-on-year against 21% for large-caps. Revenue growth between the two categories was broadly similar at 18-19%, meaning the outperformance came largely from margins, as SMID profit margins recouped losses seen through the second half of FY25 and first half of FY26 to hit an all-time high.
Exporters at an inflection point
Nuvama flagged chemicals and export-oriented auto ancillaries as sectors nearing an inflection point, aided by rupee depreciation against the Chinese yuan and a capex cycle that is now largely behind the sector. The brokerage listed 15 stocks across large-caps and small and mid-caps that it believes are at potential earnings inflection points, including Divi's Laboratories, Eicher Motors, Grasim Industries and Shriram Finance among large-caps, and Aarti Industries, Balkrishna Industries and Coforge among SMIDs.
FY27 estimates hold, but the "asking rate" is steep
While Street estimates for FY27 earnings have been largely stable following the Q1 print, Nuvama cautioned that consensus still pencils in 19% growth for BSE500 (ex-OMCs) and mid-teens growth for the Nifty over FY27 and FY28, a target the brokerage described as a tall ask given persistent demand headwinds.
The note pointed to weak household incomes, a subdued credit multiplier and the risk of an El Nino weighing on farm incomes as reasons why the tailwinds that powered Q1, including GST cuts, rising metal prices and rupee depreciation, are likely to turn into headwinds in the second half of the financial year. Unless a fresh demand stimulus emerges, Nuvama expects a sharp deceleration in both revenue and profit growth in H2FY27.
Nuvama's sector stance
Nuvama's key overweight sectors are IT, cement, chemicals and private banks, while it remains underweight on industrials, metals and power.
Valuations remain elevated
Nuvama noted that Indian market valuations remain stretched, with market capitalisation to GDP at 134% against a long-term average closer to 92%, and the Nifty's one-year forward price-to-earnings ratio at 18 times. The brokerage said high valuations combined with weak income growth are likely to keep markets volatile in the months ahead, even as it maintained its sector overweight and underweight calls with only minor tweaks to portfolio weights.
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