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Emkay Global Financial Global has reiterated its constructive stance on Indian equities despite ongoing geopolitical uncertainties and elevated crude oil prices, projecting the Nifty to touch 29,000 by March 2027 at a target valuation multiple of 19.2x FY28 earnings. In its latest India Strategy report, the firm highlighted that while near-term volatility may persist due to the prolonged Middle-East conflict and continued pressure on global energy markets, India’s domestic macroeconomic resilience, improving earnings trajectory and policy support continue to offer a strong foundation for long-term growth.

According to the report, the Q4FY26 earnings season has begun on a relatively steady note, with nearly 20% of Emkay’s coverage universe having reported results so far. Of these, 46% of companies delivered earnings above expectations, while only 29% reported misses, reflecting broad-based resilience across sectors despite an uncertain external environment. Importantly, Emkay Global has retained its FY27 Nifty EPS estimate at Rs 1,230, with earnings growth expectations holding at nearly 13%, signaling confidence in India Inc.’s ability to navigate near-term headwinds.

The report noted that Indian equities have recently lost some valuation support, with the Nifty currently trading at around 19.2x FY27 forward earnings, close to its five-year long-term average valuation. However, Emkay Global believes that any sharp correction driven by global concerns should be viewed as a tactical buying opportunity rather than a structural risk to India’s long-term growth outlook. The brokerage remains overweight on sectors such as discretionary consumption, materials, industrials and real estate, while maintaining an underweight stance on financials, energy, healthcare, staples, telecom and technology in the near term.

A key concern highlighted in the report is the ongoing geopolitical crisis in the Middle East, particularly the prolonged closure of the Strait of Hormuz, which has now remained shut for over eleven weeks. The disruption has triggered a sharp spike in crude oil prices, with Brent crude sustaining in the USD105–110 per barrel range. However prolonged elevated oil prices could materially impact India’s macroeconomic stability given the country’s dependence on energy imports.

Emkay’s macroeconomic scenario analysis indicates that if Brent crude sustains at USD100 per barrel, India’s current account deficit could widen to 2.4% of GDP compared with the pre-shock baseline estimate of 1.3%. At the same time, GDP growth could moderate to 6.3% from the baseline estimate of 7%, while CPI inflation may rise to 4.6%. In an extreme scenario where, crude prices surge to USD130 per barrel, GDP growth could decline further to 5.5%, while inflation may rise to 5%, significantly increasing pressure on policymakers and household consumption.

Seshadri Sen, Head of Research & Strategist Emkay Global Financial Services, said, “While global geopolitical developments and elevated crude prices may continue to create intermittent volatility, India’s structural growth drivers remain intact. Earnings resilience, policy support, easing domestic inflationary pressures and ongoing capex investments continue to provide a strong foundation for Indian equities. We believe any near-term market weakness should be viewed as an opportunity for long-term portfolio positioning. As external risks moderate, India remains well placed to deliver strong earnings growth and sustained economic expansion over the medium term.”

The report further observed that the recent Rs 3 per litre increase in fuel prices addresses only around 20% of the prevailing under-recoveries faced by oil marketing companies, indicating that additional fuel price hikes may become inevitable if crude prices remain elevated. Emkay Global stated that sustained high energy prices create a “four-way drag” on the economy by impacting inflation, corporate profitability, government finances and consumer spending simultaneously.

Despite these near-term risks, Emkay Global remains optimistic about India’s broader economic recovery trajectory. The report emphasized that several domestic policy measures continue to provide meaningful support to growth and consumption. These include income tax cuts, GST reductions and cumulative RBI rate cuts of nearly 125 basis points since February 2025, all of which are expected to support liquidity, boost discretionary spending and revive private sector investment. Additionally, the government’s sustained capex push in sectors such as railways and defence is expected to continue driving economic activity and employment generation.

The report also highlighted that while a stronger US dollar and elevated oil prices may continue to exert pressure on the Indian rupee in the near term, the Reserve Bank of India is likely to maintain a cautious policy approach to preserve macroeconomic stability. Emkay Global expects rupee pressures to gradually ease once the geopolitical situation stabilizes and the Strait of Hormuz reopens, which could also support easing bond yields and improved investor sentiment.

Importantly, Emkay Global believes that markets are still under-pricing the potential earnings recovery expected over FY27 and FY28. The report noted that despite prevailing concerns, the earnings growth outlook for Indian corporates remains robust, with expectations of nearly 14% growth over the next two financial years. According to the brokerage, this creates a favourable risk-reward opportunity for investors willing to look beyond near-term volatility and focus on India’s structural growth drivers.

The report further added that a potential diplomatic resolution to the ongoing Iran conflict and normalization of crude oil supply routes could significantly improve market sentiment and trigger a revival in consumption-led growth. Once energy prices stabilize, the combination of easing inflation, supportive monetary policy and continued domestic capex could drive a stronger rebound in economic activity and equity markets. Seshadri Sen indicated that the rupee would bounce back once the situation returns to normal and the Strait starts operating as before.

The BFSI segment, particularly the NBFC space, has witnessed a significant re-rating over the last two to three years, supported by a favourable interest rate cycle, rating upgrades and substantial improvements in balance sheet quality. According to Emkay Global, stronger capital adequacy, declining NPAs and the clean-up of legacy stress across several NBFCs have enhanced investor confidence in the sector. The report also noted that NBFCs have consistently delivered superior growth compared to banks, while maintaining stable-to-improving profitability metrics. While the pace of outperformance versus banks may moderate going forward amid a more stable rate environment, Emkay Global believes select NBFCs are still well-positioned to deliver healthy compounding supported by robust growth and profitability trends.

The report further highlighted a mixed but improving outlook for the insurance sector. The life insurance industry witnessed healthy APE growth during FY26, aided by GST-related tailwinds in the second half of the fiscal year. Despite the impact of GST ITC losses, insurers benefited from an improving product mix skewed towards protection products, resulting in stronger VNB margin delivery. In the general insurance segment, growth momentum improved in H2FY26, led by enhanced affordability in retail health insurance following GST rate exemptions. However, Emkay Global cautioned that the general insurance outlook remains challenging due to elevated claims ratios, aggressive pricing in the motor OD segment and continued pressure in the fire insurance segment owing to higher discounting. The brokerage expects profitability and margin preservation to remain a key focus area for insurers going ahead.

Avinash Singh, Deputy Head of Research, Emkay Global Financial Services, said, “The NBFC sector has witnessed a strong re-rating cycle over the last few years driven by improving asset quality, stronger capitalisation and superior growth delivery versus traditional banks. While the favorable rate cycle may now be behind us, select NBFCs continue to remain well-positioned to deliver healthy compounding supported by robust profitability, disciplined underwriting and sustained credit demand. In the insurance space, life insurers are expected to continue witnessing healthy growth momentum aided by GST-related tailwinds, improving product mix and stronger margin delivery, while profitability will remain a key focus area for general insurers amid elevated claims ratios and pricing pressures across segments.”

The domestic automobile sector continues to demonstrate strong structural growth momentum across key segments, with industry volumes projected to rise steadily through FY28. According to Emkay Research, total industry volumes are expected to grow from 36.6 million units in FY26 to nearly 42.8 million units by FY28, supported by healthy demand in two-wheelers, passenger vehicles and commercial vehicles. Notably, the two-wheeler segment, particularly motorcycles and scooters, continues to offer a significant growth runway as volumes remain only marginally above pre-pandemic FY19 levels. The report also highlighted that electric two-wheeler adoption continues to accelerate, while premiumization trends across motorcycles and SUVs are reshaping the overall industry mix.

Emkay Global further observed that commodity inflation remains a near-term headwind for automotive manufacturers, with raw material cost pressures expected to necessitate calibrated price hikes across vehicle categories. Despite this, leading OEMs remain optimistic about medium-term demand supported by improving affordability, GST-related tailwinds and sustained consumer preference for premium products. The brokerage noted that SUVs now account for nearly 58% of the passenger vehicle industry mix in FY26 and are expected to exceed 60% by FY28. At the same time, management commentary across major automobile companies indicates continued focus on balancing margin protection with market share gains amid evolving commodity cycles and changing consumer preferences.

“India’s automobile sector continues to demonstrate strong structural growth momentum, led by premiumization trends, rising EV adoption and improving demand across two-wheelers and SUVs. While commodity inflation remains a near-term challenge, the industry remains well-positioned to deliver healthy volume growth over the medium term” said Chirag Jain, Deputy Head of Research, Emkay Global Financial Services.

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