Indian equity markets continue to present a compelling investment opportunity, with the Nifty 50 expected to experience robust earnings growth in the coming years, as per a report by Aditya Birla Capital. The report predicts that the Nifty 50’s earnings per share (EPS) will grow at a compound annual growth rate (CAGR) of around 13% over the fiscal years 2025-2027.
“We anticipate NIFTY50 EPS to grow at a CAGR of approximately 13% over FY25-27. At its current valuation of 17.3x FY26 PE, NIFTY50 is trading at approximately 10% discount to its 10Y historical average, presenting an attractive opportunity,” the report stated.
The report also highlighted that the index is currently trading at 17.3 times its estimated earnings for FY26, which is nearly 10% lower than its 10-year historical average. This suggests that Indian equities remain reasonably priced despite recent market movements.
Furthermore, the report pointed out that India’s economic growth remains strong, supported by a stable central government and healthy corporate balance sheets. The country’s fiscal deficit is on a downward trajectory, reinforcing confidence in economic stability. Given these favorable conditions, Indian markets deserve a higher valuation premium compared to other global economies.
Regarding the recently announced FY26 Budget, the report noted its focus on key areas such as agriculture, employment, skill development, exports, and MSMEs. The budget also introduced strategic adjustments in import tariffs to counter potential trade policies from the US, especially under a potential Trump administration.
A significant aspect of the budget is its efforts to boost consumption. The revision of direct tax slabs by the government is expected to increase disposable income and bolster urban demand. Additionally, rural development initiatives and expectations of a favorable monsoon are likely to further enhance rural consumption.
In conclusion, the report categorized the budget as “neutral to positive” and gave it a rating of 7 out of 10. While challenges persist, the long-term growth narrative of Indian equities remains intact, offering a promising investment opportunity for investors.
