After the recent bout of correction, international brokerage house and investment bank, BofA Securities believes that Indian equities are moving closer to fair value even as earnings risks build. They have cut the FY27 Nifty earnings growth estimate to 8.5% from 14% earlier but at the same time, have identified 24 high-conviction stock ideas across sectors such as banking, telecom, energy and industrials.
The international brokerage house said rising crude prices, weaker growth assumptions and ongoing geopolitical tension are weighing on margins and demand, prompting a downgrade in earnings expectations. At the same time, it sees selective opportunities in large-cap and some midcap names where valuations have corrected.
BofA Securities now assumes crude at $92.5 per barrel and FY27 GDP growth at 6.5%, down from 7.4% earlier, reflecting the macro pressure feeding into corporate earnings.
BofA Securities’ high-conviction stocks: HDFC Bank, ICICI Bank, Bharti Airtel, L&T, ONGC among key picks
BofA Securities identified 24 high-conviction stock ideas across sectors, with a clear tilt towards large-cap names that offer earnings visibility and relatively stable balance sheets. The list includes HDFC Bank, ICICI Bank, Bharti Airtel, Larsen & Toubro, ONGC, Coal India, Vedanta, Hindalco Industries, NTPC, Power Grid Corporation of India, Hero MotoCorp and Apollo Hospitals, among others.
Within banking, the brokerage prefers HDFC Bank and ICICI Bank, citing lower downside risks and improving growth visibility. It expects loan growth to normalise and margins to improve as funding costs stabilise, with both banks benefiting from strong liability franchises.
“Lower downside risk amidst evolving macro: see lower risk to loan growth outlook given diversified loan portfolio and lower beta to system credit growth. A potential easing of geopolitical risks (incl. faster resolution) could aid system credit demand, positioning both banks for an uptick in growth momentum,” it explained.
The report also highlighted that both banks have corrected in recent months without significant earnings downgrades, which, according to the brokerage, makes current valuations more attractive relative to their historical averages.
BofA Securities on telecom and industrials: Bharti Airtel and Larsen & Toubro in focus
In telecom, Bharti Airtel is positioned as a relatively defensive name with stable demand and potential upside from tariff hikes and improving free cash flows. The brokerage said telecom spending remains less sensitive to inflation compared to other discretionary segments.
It also pointed to the completion of major 5G capex as a positive, which could support cash flow generation going forward. Data centre opportunities were cited as an additional growth driver.
“We see three key factors that could support the stock from here: a) limited incremental downside from the ongoing Iran conflict, b) potential $200bn step-up in India’s power capex to achieve energy security (See note: Power Ahead), and c) potential for L&T to benefit from Middle-East capex post the conflict to rebuild infrastructure & potential gas pipelines (est. $20-40bn),” the firm added.
BofA Securities on energy and metals: ONGC, Coal India, Vedanta and Hindalco preferred
In industrials, Larsen & Toubro is identified as a key pick, with BofA Securities highlighting potential benefits from domestic power capex and reconstruction activity in the Middle East following the conflict.
Energy and commodity-linked companies form a significant part of BofA Securities’ high-conviction list, reflecting its positive view on elevated commodity prices.
The brokerage prefers upstream companies such as ONGC and Oil India, which benefit directly from higher crude prices, particularly in the absence of windfall taxes.
Coal India is also highlighted due to higher global coal price assumptions and strong dividend yield expectations, while Vedanta and Hindalco are expected to benefit from higher aluminium prices and supply constraints.
“We have a Buy rating on Coal India given undemanding valuations… and healthy dividend yield,” the report said.
The brokerage added that aluminium prices could rise further due to supply disruptions, supporting earnings for non-ferrous companies.
BofA Securities on autos, healthcare and utilities: Hero MotoCorp, Apollo Hospitals, NTPC among picks
In autos, BofA Securities identified Mahindra & Mahindra and Hero MotoCorp as preferred names, citing favourable valuations and demand visibility despite broader sector concerns.
Hero MotoCorp, in particular, is seen benefiting from improved demand momentum and margin discipline, with the brokerage noting valuation comfort at current levels.
“Risk reward now seems favorable for Hero MotoCorp with valuation at 17.5x/16x F27/ F28 PE,” the report said.
In healthcare, Apollo Hospitals is highlighted for earnings momentum and potential value unlocking, while regulated power utilities such as NTPC and Power Grid are expected to benefit from rising electricity demand and infrastructure investments.
““Beyond seasonal near-term demand growth, we believe, hyperscaler-led data center build out (10GW by 2030) and increasing consumer durables penetration could structurally drive incremental power demand,” the report said.
BofA Securities on earnings: Growth cut as macro pressure intensifies
BofA Securities has lowered its FY27 Nifty earnings growth estimate to 8.5%, down from 11% in March and 14% before the escalation of geopolitical tensions. The brokerage said this reflects higher energy prices, weaker demand and currency pressures.
It expects companies to absorb a large part of input cost inflation, leading to margin compression, while demand slowdown affects volumes.
“Consequently, we are now significantly below consensus at 15% YoY,” the brokerage said.
The report added that in a prolonged conflict scenario, GDP growth could fall towards 3% and Nifty earnings growth could drop to 0% in FY27.
BofA Securities on valuations: Near long-term averages, not yet a value zone
BofA Securities said Nifty valuations are now close to their 10-year long-term averages but still not low enough to qualify as attractive entry levels.
It noted that during past crises, valuations have typically fallen below long-term averages before recovering, which has not yet occurred in this cycle.
“Our analysis of six crises over past 15 years suggests, Nifty valuations typically contract between -1SD & its 10-year long term averages (LTA), while it expands to a premium vs LTA post the crisis,” the report said.
The brokerage also highlighted that India continues to trade at a premium compared to other emerging markets on both valuation and earnings yield metrics.
BofA Securities scenarios: 15% upside in base case, downside risks persist
BofA Securities outlined three possible outcomes for the Nifty based on its earnings and valuation assumptions.
| Scenario | Nifty target | Upside / Downside |
| Base case | 26,200 | +15% |
| Bear case | 20,910 | -8% |
| Worst case | 17,404 | -23% |
In the base case, the brokerage expects a moderate recovery driven by valuation expansion if geopolitical tensions ease.
“However, in a bear case, valuations could drift to lower range of previous crises, at -1SD, posing a further 8% downside,” the brokerage said.
In the worst-case scenario, earnings growth could stall completely, with valuations compressing further and leading to a 23% downside.
BofA Securities on sector stance and macro risks: Energy exposure remains key concern
BofA Securities has shifted its sector stance towards energy-linked and defensive sectors while downgrading rate-sensitive segments such as NBFCs, real estate and passenger vehicles.
The brokerage highlighted India’s dependence on Middle East energy imports, noting that 28% of crude, 64% of LNG and 94% of LPG imports come from the region, increasing vulnerability to geopolitical disruptions.
It added that every $10 per barrel increase in crude prices could raise inflation by 25–30 basis points annually, affecting both corporate margins and consumption demand.
Conclusion
BofA Securities combines a cautious macro outlook with selective stock positioning. While valuations have corrected, the brokerage does not see sufficient margin of safety for a broad-based positive stance.
Earnings growth expectations have been lowered, and downside risks remain linked to oil prices and geopolitical developments. At the same time, its list of high-conviction stocks indicates that opportunities remain concentrated in specific sectors and companies rather than across the broader market.
Investment Disclosure and Market Risk Advisory
This report summarizes sector-specific analysis and “high-conviction” stock ideas from BofA Securities; however, these mentions do not constitute a direct offer, solicitation, or recommendation to buy, sell, or hold any security. Global brokerage predictions and Nifty target scenarios are based on evolving macroeconomic assumptions—including crude prices and GDP growth—which are subject to significant market volatility.
Investors are strongly advised to consult a SEBI-registered investment advisor or a qualified financial professional before making any decision, as individual risk profiles and financial goals vary. Past performance of the stocks mentioned is not a guarantee of future results, and actual market outcomes may differ materially from the base, bear, or worst-case scenarios presented.
This disclaimer has been generated using AI to support user well-being and responsible content consumption.