New Delhi, October 24: Indian equity market valuations have declined significantly from their September 2024 peaks, even as corporate earnings and credit growth show signs of improvement, according to a report released by Bajaj Asset Management on Saturday.
The report projected BSE 500 earnings growth of 17 per cent in FY27 and 16 per cent in FY28, indicating improving corporate profitability despite continued market uncertainty.
Nifty Valuations Witness Sharp Correction
The Nifty 50’s 12-month forward price-to-earnings (P/E) ratio declined 31 per cent, from 24.8 times in September 2024 to 17.2 times in September 2026.
Similarly, the Nifty Midcap 150 valuation fell 36 per cent from 35.6 times to 22.8 times.
The Nifty Smallcap 250 witnessed a smaller correction of 7 per cent, with its valuation declining from 25 times to 23.2 times.
Earnings Growth Outlook Remains Positive
Bajaj AMC projected earnings growth of 16 per cent for large-cap companies, 19 per cent for mid-caps and 28 per cent for small-caps.
Large-cap earnings growth accelerated to 23 per cent in Q1 FY27 from 10 per cent in Q4 FY26, while mid-cap earnings increased 23 per cent.
Nifty 50 profits rose 19 per cent year-on-year, with commodity and telecom companies accounting for approximately 60 per cent of incremental profits.
Banking And Healthcare Sectors In Focus
The report identified banking and financial services as beneficiaries of improving credit growth and stable asset quality.
Healthcare and power equipment companies also showed favourable long-term demand prospects.
However, information technology companies face challenges from weak demand visibility, global policy uncertainty and potential artificial intelligence-related disruption.
Market Risks Continue Despite Valuation Reset
India’s market capitalisation-to-GDP ratio declined from 150 per cent in September 2024 to an estimated 122 per cent for FY27.
Sorbh Gupta, Head of Equity at Bajaj AMC, said sustained earnings growth would remain crucial for future market performance.
The report cautioned that elevated crude oil prices and global uncertainties could keep domestic equities volatile in the near term.
