JP Morgan has reiterated its 27,000 target for the Nifty 50, as India’s first-quarter FY27 earnings season delivered the strongest growth since June 2024. The brokerage stated that it is more positive on selected domestic cyclicals than on the market as a whole.
JP Morgan outlined that stocks such as Hitachi Energy, ABB and NTPC are positioned to benefit from rising power and data-centre demand. At the same time, ITC, Dr Reddy’s, Cipla and #IndiGo were among heavyweight names that weighed on aggregate profitability.
JP Morgan sees earnings momentum strengthening
The first-quarter performance was materially better than the 10% YoY growth reported in the fourth quarter of FY26, according to JP Morgan. The 19% increase in revenue and 16% rise in PAT across MSCI India came with a 10-basis-point expansion in EBITDA margins, excluding oil marketing companies.
The earnings performance was also broader than in the previous quarter. JP Morgan said MSCI India companies recorded a 58% beat-to-24% miss ratio, with IT and Financials producing the largest positive surprises, at more than 5% of estimates. Communication Services and Health Care had the largest misses, at less than 5% of estimates.
The Nifty 50 delivered revenue and PAT growth of 20% and 12% YoY, respectively, during the quarter, while EBITDA margins expanded by 2 basis points. Its beat-to-miss ratio was stronger than that of MSCI India at 64% to 20%, based on Bloomberg consensus estimates for companies not covered by the brokerage.
The stronger numbers were not limited to large companies. The Nifty Midcap 100, excluding Energy, recorded 42% YoY PAT growth, while the Nifty Smallcap 100 posted 39% YoY PAT growth. The figures point to faster profit growth across parts of the broader market, although JP Morgan said several heavyweight companies continued to hold back aggregate profitability.
Domestic demand remains the main support
The common thread in management commentary was the resilience of domestic demand despite a difficult external environment. Companies continued to point to local consumption and investment activity as a source of support at a time when geopolitical tensions, trade restrictions and higher input costs were creating uncertainty.
Within MSCI India, Materials, Utilities, Industrials and Discretionary reported high earnings growth, according to the brokerage. JP Morgan also identified power demand, the capex and grid cycle, defence, autos and a volume-led recovery in consumer staples as the main structural areas of strength.
The brokerage said management teams were generally focused on profitable expansion rather than chasing volumes at any cost. Companies were discussing calibrated pricing, margin discipline and maintaining full-year guidance despite uncertainty around geopolitics and the monsoon.
That combination of stronger domestic demand and disciplined corporate behaviour is central to JP Morgan’s earnings view. The brokerage estimates that MSCI India earnings will grow 11% in CY26 and a further 13% in CY27, giving the market a relatively strong earnings base even as global conditions remain unsettled.
Monsoon and external risks remain important
The improvement in earnings has not removed the pressure from the external environment. JP Morgan said companies repeatedly referred to a two-sided macro backdrop, with the Middle East conflicts, crude oil prices, disrupted shipping and logistics, higher input costs, tariffs and trade-policy uncertainty creating risks for businesses.
On the domestic side, companies continued to see support from GST 2.0 rate cuts, income-tax relief, strong tax and GST collections and sustained government capex. The report also referred to an easing cycle that has now been paused, with lower borrowing costs having previously supported domestic activity.
The monsoon remains another important variable. Management teams described a weak start to the southwest monsoon followed by a recovery through July. Rural-facing businesses, including NBFCs, FMCG companies, automakers, agri-input producers and cement companies, identified rainfall as a major factor for demand during the remainder of the year.
For these businesses, the monsoon can affect more than agricultural income. It can influence rural cash flows, vehicle purchases, consumer-goods demand, farm-input sales and construction activity. A stronger rural cycle would therefore provide another source of domestic demand, while weaker rainfall could put pressure on the earnings recovery in several consumption-linked sectors.
Power demand opens a new capex cycle
JP Morgan sees artificial intelligence and data centres becoming an important source of incremental electricity demand in India. The report said AI, data centres and related infrastructure have emerged as a structural growth theme, particularly for power and electrical-equipment companies.
The brokerage cited Hitachi Energy, GE Vernova, T&D, ABB and NTPC in connection with this trend. It estimates that data centres, AI and electric vehicles could add around 30GW to peak power demand.
The significance extends beyond technology companies. Data centres require large and reliable electricity supplies, which in turn require generation capacity, transmission infrastructure, grid equipment and electrical systems. That creates potential demand across several parts of the power value chain.
The report also estimates current peak power demand at around 271GW, adding to the case for continued investment in generation and transmission. Companies supplying equipment and services to the power sector could therefore benefit from a cycle that is being supported by both traditional industrial demand and newer requirements linked to AI and data centres.
JP Morgan’s prefers domestic cyclicals
JP Morgan’s preferred positioning leans heavily towards high-growth domestic cyclicals. The brokerage sees stronger opportunities in companies that can benefit from domestic investment, infrastructure spending and consumption rather than relying mainly on external demand.
Power and electrical equipment are among the clearest areas of interest. Defence and capital expenditure are also supported by government spending, while autos are benefiting from volume growth and stronger exports. Consumer staples, meanwhile, are showing signs of a recovery led more by volumes than pricing.
The brokerage’s assessment of autos is particularly relevant because it sees the sector as part of a wider domestic demand story. Volume growth provides a more durable source of revenue than price-led growth, while exports can add another source of demand for manufacturers and suppliers.
The same principle applies to consumer companies. A volume-led recovery indicates that households are buying more rather than simply paying higher prices for the same quantity of goods. That could provide a healthier base for earnings if rural demand improves further.
Weak heavyweight results mask broader strength
The aggregate MSCI India earnings numbers were dragged down by several large companies, according to JP Morgan. The brokerage specifically cited ITC in staples, Dr Reddy’s Laboratories and Cipla in healthcare, IndiGo in industrials and transport, and oil marketing companies in energy.
This has created a gap between the headline market earnings number and the performance of several sectors underneath it. While a handful of large companies reported weaker results, Materials, Utilities, Industrials and Discretionary recorded stronger earnings growth.
The brokerage therefore sees the first-quarter numbers as evidence of broader earnings improvement rather than a recovery driven only by a few index heavyweights. The 58% beat-to-24% miss ratio for MSCI India and 64% to 20% ratio for the Nifty 50 also point to a relatively healthy earnings distribution.
The midcap and smallcap numbers reinforce that reading. PAT growth of 42% for the Nifty Midcap 100 excluding Energy and 39% for the Nifty Smallcap 100 was well above the growth recorded by the broader MSCI India universe.
JP Morgan retains 27,000 Nifty target
JP Morgan has retained its 27,000 base-case target for the Nifty 50, with a 30,000 bull-case target and 20,500 bear-case target. The range captures the competing forces affecting the market over the next several quarters.
The base case rests on continued domestic earnings growth, government capex, power infrastructure spending and resilient consumption. The bull case would require these trends to remain firm while external pressures ease. The bear case could come into play if geopolitical risks intensify, crude prices rise sharply, trade restrictions worsen or the rural recovery fails to gain traction.
The brokerage’s earnings estimates provide the main support for the 27,000 target. MSCI India earnings growth of 11% in CY26 and 13% in CY27 would give companies room to sustain profit growth even if the broader economy faces periodic external shocks.
Conclusion
India’s earnings cycle has therefore entered FY27 with stronger momentum than the market had seen for much of the previous year, but the durability of that growth will depend on whether domestic demand can continue to offset external shocks. The next test will come from the monsoon, rural consumption and corporate capex, while the expanding electricity needs of AI, data centres and EVs could provide a longer-running source of demand for the companies tied to India’s power and infrastructure build-out.