India GDP growth looks stronger on paper; earnings momentum to build in FY27: GV Giri, IIFL Capital

ndia’s headline GDP growth may look impressive, but equity markets are likely to focus more on earnings acceleration and valuation comfort going ahead, according to GV Giri, President and Head of Research at IIFL Capital.

Speaking to ET Now, Giri said India’s reported 8.2% real GDP growth needs to be seen with caution, as it has been supported by a compressed deflator. “High-frequency indicators suggest actual growth may be closer to 6.5–7%. The acceleration we are seeing is selective, led by autos and a few sectors after GST cuts,” he noted.

Earnings outlook improving, but valuations remain demanding

Giri expects corporate earnings to regain momentum in FY27, aided by both underlying growth and a bounce-back in large companies. “For the Nifty, underlying earnings growth has been around 13–14%. In FY27, we see a double boost—normalisation plus recovery in large names like airlines and banks. Nifty earnings growth of 16–17% looks achievable,” he said.

However, he cautioned that Indian equities remain relatively expensive. “At around 20.4 times earnings, India has not delivered enough growth to justify a major re-rating yet. Compared to the US or China, innovation-led earnings growth is still limited in India,” Giri added, referring to global leaders in AI, robotics and drug discovery.

Banks set to be key profit pool

Giri identified banks as the biggest potential beneficiaries in the current cycle. “We saw 125 basis points of rate cuts in 2025, and deregulation by the RBI and the government. As loan growth picks up, credit costs will remain low and margins should expand in the second phase of rate repricing,” he said.

Private banks and NBFCs could see strong earnings leverage, with some NBFCs already delivering over 30% EPS growth. “Historically, banks have been spectacular outperformers during rate-cut cycles, and this time should be no different,” he noted.

Other sectors to watch

Beyond financials, Giri highlighted cement, hospitals and pharmaceuticals as sectors showing improving volume and earnings visibility. He also sees sustained profit growth in internet and platform companies such as Swiggy and Zomato, where scale and operating leverage are beginning to show.Overall, Giri expects Indian markets to “hold their own” with mid-teen earnings growth, even if valuations cap near-term upside. “Unless something goes materially wrong, Nifty returns should broadly track earnings growth of 15–17%,” he concluded.