PL Capital anticipates a decline in Nifty’s earnings growth, predicting a two-percentage-point drop in FY26 as the nation faces a challenging environment characterized by escalating geopolitical tensions, surging crude oil prices, and disruptions in global supply chains. The benchmark index is expected to achieve a 4% earnings growth for the fiscal year ending March 2026, compared to a growth of 6% recorded in FY25, according to the India Strategy report released by PL Capital.
The medium-term forecast indicates a compounded annual growth rate of 15% for Nifty between fiscal years 2026 and 2028.
Currently, the Nifty is valued at 17 times its one-year forward earnings multiple, reflecting a 12.4% discount from its historical average of 19.4 times over the past 15 years. In a base case scenario, a valuation of 17.5 times, which is a 10% discount from the historical average based on a projected FY28 earnings per share of 1,551, would lead to a target price of 27,080.
Over the past three months, the Nifty has experienced a decline of 6.6%, driven by continued redemptions from foreign institutional investors amidst geopolitical instability, notably the ongoing crisis in West Asia. Although there has been a notable rally following recent lows, market conditions remain volatile due to global risks and rising commodity prices.
The increase in crude oil prices could elevate India’s oil import costs by over $70 billion annually, potentially pushing inflation beyond 5%. Additionally, supply chain disruptions and the anticipated El Niño effect on the monsoon could contribute to higher inflation levels. Current GDP growth, approximately 6.5%, may further decrease to 6%.
Sharp increases in oil prices are unlikely to return to pre-war levels. India, which imports 4.3 million barrels of crude per day at a value of $180 billion, faces the prospect of a substantially increased import bill.
Amnish Aggarwal, Co-Head of Institutional Equities at PL Capital, stated that while India’s growth fundamentals remain strong in the long term, short-term challenges, including inflation, interest rate concerns, and fluctuations in foreign demand, are expected to hinder economic growth. He noted that current market valuations already reflect these hurdles, but any prolonged instability could lead to further earnings downgrades.
Published on April 21, 2026.
