BofA cuts India’s Nifty 50 earnings forecast as stagflation fears rise

BofA Securities has slashed its earnings growth forecast on Monday for India’s benchmark Nifty 50 companies for fiscal year 2027 to 8.5%, down from 14% projected before the Iran conflict, citing rising stagflation risks.

Brent crude prices hovering near $110 per ‌barrel ⁠could strain India’s ⁠import bill, given its position as the world’s third-largest crude importer, and put pressure on corporate margins.

Here are some details:

* In its base case, BofA assumes crude prices at $92.5 per barrel and has lowered India’s FY27 GDP growth estimate to 6.5% from 7.4% ⁠earlier * In ‌a worst-case scenario involving a prolonged Middle East conflict, GDP growth can slide to ⁠3%, while earnings growth may drop to zero in fiscal year 2027

* The Nifty 50 index is currently trading close to long-term average valuations. A potential resolution to the Iran conflict could trigger a 15% upside ** BofA, however, expects the index to continue underperforming its emerging market ‌peers due to relatively expensive valuations ** The brokerage has set Nifty target for December-end at 26,200, compared with its current ⁠level of 22,663 ** The brokerage projected opportunities within large-caps and select themes in broader market after correction

** Downgrades rate-sensitive sectors like mid-sized private banks, non-bank lenders, real estate, and automobile companies to “underweight” from “overweight” earlier

** BofA prefers energy- and rate-hike beneficiaries such as large private sector banks and state-owned lenders