Indian equities may look attractive on FY28 earnings within six months, Julius Baer says
Julius Baer India’s Nitin Raheja argues that sustained earnings growth and structural domestic inflows could make Indian stocks appealing to investors within half a year.
Indian equities could become increasingly attractive on fiscal year 2028 earnings within the next six months, according to Nitin Raheja, Head of Discretionary Mandates at Julius Baer India. This outlook hinges on sustained corporate earnings outperformance and the continuation of resilient domestic mutual fund inflows.
The Nifty 50 currently trades around its long-term historical averages. Raheja characterizes the market's behavior over the past two years as a “time correction” rather than a sharp price correction. This relative stability has been underpinned by steady retail investment channeled through domestic mutual funds.
Recent corporate results support a constructive near-term view. Excluding public sector oil marketing companies, BSE 500 stocks delivered 23 percent overall earnings growth in the first quarter. This expansion was broad-based, with large and mid-cap companies growing 23 percent and small caps surging 28 percent.
India continues to trade at a premium to most emerging markets, driven by supernormal growth in peers like South Korea and Taiwan. However, if the current trend of earnings outperformance continues, valuations will begin to look cheaper on a forward basis.
While domestic institutional investors have been relentless buyers, foreign portfolio investor interest is also showing early signs of revival. Raheja notes it is premature to declare a definitive turnaround in foreign flows. A gradually narrowing overvaluation gap between India and other emerging markets could act as a trigger for more sustainable international capital inflows.
The bullish thesis faces distinct macroeconomic headwinds that investors cannot ignore. A simultaneous combination of elevated US bond yields, rising crude oil prices, and a weakening rupee would act as significant market dampeners. Under such conditions, equities may continue to trade in a tight range rather than entering a broad-based bull run.
Consequently, the current environment heavily favors selective stock picking over passive index exposure. Performance across market capitalizations remains highly uneven despite headline index strength. Within the Nifty 100, 42 stocks representing 46 percent of the index's capitalization have underperformed the broader benchmark.
A similar pattern exists in the mid-cap segment, where 97 stocks accounting for 54 percent of the Midcap 150's market value have lagged the index. Investors will need to identify specific companies delivering robust earnings growth to generate returns, as broad market multiple expansion remains constrained.
