Akhil Bhardwaj, Senior Partner and Founder at Alpha Capital, believes the worst is behind for the Indian stock market. Valuations have cooled to around 19-20 times FY27 earnings, close to long-term averages.(Alpha Capital)AI Quick ReadAkhil Bhardwaj, Senior Partner and Founder at Alpha Capital, is positive about the Indian stock market, as he believes the worst is behind, even as higher crude oil prices remain a key risk. "Easing global tensions and steady domestic flows should provide support. We expect Nifty to retest 26,000 in the near term," he told Mint in an interview. Edited excerpts:
FY26 showed the risks of high valuations and too much dependence on global money flows.
Even though India’s GDP growth remained steady at around 6.5-7%, corporate earnings fell short of expectations (Nifty EPS growth was only 6-8% instead of double digits).
This was mainly due to weak rural demand, pressure on IT margins, and global risk aversion.
Foreign investors pulled out heavily (net outflows crossed $18-20 billion for much of the year, with March 2026 seeing record fortnightly selling that even surpassed Covid levels in intensity).
Domestic institutions provided strong support with record inflows of about ₹1.7 lakh crore year-to-date. Geopolitical tensions and crude oil crossing $100 per barrel added to cost pressures.
Key lessons: Earnings quality matters more than stories; diversification across sectors and market caps is essential; the growing strength of domestic investors marks a structural shift; and 15-18% corrections are normal and often create good long-term entry points.
We believe the worst is running or behind us. Valuations have cooled to around 19-20 times FY27 earnings, close to long-term averages.
Earnings downgrades have stabilised, and supportive policies are in place — including RBI’s rate cuts (total 125 bps so far) and liquidity measures, along with a fiscal deficit target of 4.3% of GDP focused on capex.
Consensus expects Nifty EPS growth of 12-14% in FY27, supported by a revival in consumption and a capex cycle.
Many brokerages see Nifty reaching 26,000-28,500 by end-2026, suggesting 15-20% upside from current levels in our base case.
Risks remain, especially if oil stays high for long, which could slow GDP by 30-50 bps. However, easing global tensions and steady domestic flows should provide support. We expect Nifty to retest 26,000 in the near term.
Financials (banks and NBFCs) should remain the backbone, benefiting from lower interest rates, improving credit growth in retail and SME segments, and better asset quality. Consumption sectors like FMCG, autos, and durables will gain from rural recovery and steady urban incomes. Capital goods, infrastructure, and realty will be supported by government spending and PLI schemes. Defensive sectors such as pharma and utilities can provide stability amid oil volatility. We are cautious on oil-sensitive areas but expect broader market participation as macro conditions improve.
IT looks like a selective value opportunity after a sharp, nearly 25% correction in the Nifty IT index.
Valuations have come down to around 23 times, closer to its long-term average. FY27 revenue guidance remains modest at 4-5% in constant currency due to AI-related pressures and cautious spending by US clients.
Still, large-cap companies with strong AI capabilities and deal wins in cloud and digital transformation are well placed for mid-single-digit growth and some margin improvement. We suggest buying quality large-caps on dips rather than avoiding the sector entirely.
The pain from the transition to AI appears largely priced in, and India’s growing domestic tech spend (including AI and data centres) offers support. Pure legacy players without clear differentiation should be avoided.
India Inc.’s earnings are on a slow but steady recovery path. FY26 saw subdued growth of around 8-10% in PAT.
FY27 is expected to see acceleration to 12-17%, supported by easing costs, benefits from GST changes, and improving consumption and capex.
The recent crude oil spike above $100 per barrel (driven by US-Iran tensions) has delayed the recovery somewhat.
Higher oil raises inflation and the current account deficit, while adding $12-18 billion to the import bill for every $10 rise.
This squeezes margins in sectors like autos, chemicals, and logistics. Government steps such as excise duty cuts and subsidies have helped protect consumers and limit fiscal damage, so the impact may last only 1-2 quarters.
We expect the earnings recovery to pick up again in the second half of FY27 as oil prices moderate and companies regain pricing power.
FPI outflows in FY26, especially the record pace in March, were indeed very sharp — driven by higher US yields, shifts in capital toward AI plays in the US and Taiwan, rupee weakness (near 94/USD), and geopolitical worries.
Domestic institutions absorbed a large part (around 70%) of this selling. We expect meaningful FPI inflows to resume by Q2 FY27.
Triggers could include de-escalation in oil prices and rupee stabilisation, India’s growth advantage (6%+ GDP versus global slowdown), progress on trade deals, and attractive valuations.
History suggests that after big outflows, foreign investors usually take 3-6 months to return. Patience will be important here. In summary, FY26 was a year of consolidation and a healthy valuation reset.
FY27 looks more promising, driven by improving earnings. At Alpha Capital, we remain constructive on Indian equities and prefer a Balanced Asset allocation approach.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
Nishant is a market reporter at Mint, where he holds the official designation of Principal Correspondent – Markets. He has been closely tracking the Indian stock market as well as major global stock markets along with the broader macroeconomic trends for a decade.
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