India’s GDP growth looks stronger on paper; earnings momentum to increase in FY27: GV Giri, IIFL Capital

India’s overall GDP growth may look impressive, but equity markets are likely to focus more on earnings acceleration and valuation comfort going forward, said GV Giri, president and head of research at IIFL Capital.Speaking to ET Now, Giri said India’s reported real GDP growth of 8.2% should be viewed with caution as it is supported by a compressed deflator. “High-frequency indicators suggest that actual growth could be closer to 6.5-7%. The acceleration we are seeing is selective, led by the auto sector and some sectors after VAT cuts,” he noted.

Earnings prospects are improving, but valuations remain high

Giri expects corporate earnings to regain strength in FY27, helped by both underlying growth and a recovery in large companies. “For the Nifty, underlying earnings growth has been around 13-14%. In FY27, we see a double boost: normalization plus recovery in big names like airlines and banks. Nifty earnings growth of 16-17% seems feasible,” he said.

However, he warned that Indian equities remain relatively expensive. “At around 20.4 times earnings, India has not yet achieved enough growth to warrant a major revaluation. Compared to the US or China, innovation-led earnings growth in India is still limited,” Giri added, referring to the world leaders in AI, robotics and drug discovery.

Banks will become the main profit pool

Giri identified banks as the biggest potential beneficiaries in the current cycle. “We saw 125 basis points of rate cuts and deregulation by the RBI and the government in 2025. As credit growth picks up, credit costs will remain low and margins should widen in the second phase of rate revision,” he said.

Private banks and NBFCs could see strong earnings growth, with some NBFCs already able to post earnings growth of over 30%. “Historically, banks have been spectacular outperformers during rate cut cycles, and this time should be no different,” he noted.

Other sectors to keep an eye on

In addition to the financial sector, Giri highlighted the cement, hospitals and pharmaceutical sectors as sectors showing improvement in volume and profit visibility. He also sees continued earnings growth at internet and platform companies like Swiggy and Zomato, where scale and operational leverage are starting to emerge. Overall, Giri expects Indian markets to “hold up” with earnings growth in the mid-teens, even if near-term valuations limit their upside potential. “Unless something goes materially wrong, Nifty returns should broadly track earnings growth of 15 to 17%,” he concluded.