Foreign Brokers Favor Indian Earnings Outlook amid Political Risks

The foreign investment houses have remained positive about the prospects of Indian equities even amidst the latest political risks, suggesting that the market's latest turbulence does not make any major impact on the company earnings forecast. Although the second quarter of June will be difficult for the companies because of rising cost of inputs and energy, the general earnings cycle is expected to be intact.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Focus Moving Away from Short-term Instabilities

Recent movement in Indian equities has been driven mostly by the political environment. However, several global brokerages have indicated that these factors are unlikely to derail the medium-term growth outlook for listed companies.

Morgan Stanley said India’s recent market underperformance appears cyclical rather than structural, citing improving domestic growth trends, supportive macroeconomic conditions and relatively light foreign investor positioning. The brokerage expects these factors to support corporate earnings over the coming quarters.

Revenue Growth Expected to Stay Healthy

Several brokerages anticipate that the June quarter will continue to show healthy revenue expansion despite pressure on profitability.

Jefferies expects revenue growth during the quarter to be the strongest in the past 13 quarters. Excluding the oil & gas and metals sectors, it estimates earnings growth of around 12% year-on-year, reflecting steady business activity across much of the economy.

Phillip Capital also expects revenue to remain resilient. It projects nearly 15% revenue growth for Nifty companies excluding oil & gas, although EBITDA growth may slow to around 2% while profit growth is estimated at about 8%.

Margin Pressure Seen as Temporary

Brokerages broadly agree that margins may remain under pressure during the June quarter because of higher commodity costs, freight expenses and inflationary pressures. However, most view these challenges as temporary rather than structural.

JPMorgan expects revenue strength to offset part of the cost pressures and believes double-digit earnings growth for Indian companies remains achievable over time. HSBC observed that the earning estimates for FY27 have already been lowered from 18% to about 15%. This observation indicates that much of the revision has already been captured into the estimates.

Phillip Capital estimates EBITDA margins for its coverage universe, excluding oil & gas, could contract by more than 220 basis points on a year-on-year basis during the quarter.

Domestic Sectors Continue to Find Support

Brokerages continue to favour financials, industrials and capital expenditure-linked businesses, supported by healthy credit demand and ongoing investment activity. Consumer discretionary also remains among the preferred sectors for some global firms.

Information technology continues to receive a more cautious assessment, with HSBC stating that a sustained recovery in the sector will depend on continued global spending on artificial intelligence initiatives. In pharmaceuticals, JPMorgan has upgraded the sector to Neutral, while maintaining a selective approach toward individual companies.

Despite near-term uncertainties, the overall assessment from global brokerages suggests that investors are likely to focus more on earnings momentum in the second half of FY27 than on a single quarter’s performance. The wider expectation is that India’s corporate earnings story will continue to be supported by better domestic fundamentals even as external risks persist.