PL Wealth’s latest Market Outlook highlights the resilience of India’s domestic growth momentum, supported by robust economic activity, returning foreign portfolio investor (FPI) flows and a firm start to the Q1 FY27 earnings season. However, elevated crude oil prices, the risk of a strengthening El Niño, and uncertainty around global interest rates could create near-term volatility, prompting a selective approach to equities and a preference for accrual-oriented fixed-income strategies.
Speaking on the outlook, Inderbir Jolly, CEO, PL Wealth, said: “India’s growth momentum and the return of foreign investor flows provide encouraging signals for the markets. However, elevated crude prices, monsoon-related risks and uncertainty around the global interest-rate environment call for a measured investment approach. We believe investors should remain selective, focus on quality and deploy capital in a staggered manner across investment horizons. Our long-term conviction in India remains intact, supported by domestic capital expenditure, financial deepening, demographics and structural growth opportunities.”
India’s GDP grew by 7.8% in Q1 FY27, aided by investments, as gross fixed capital formation (GFCF) grew by 11.9%. The Reserve Bank of India forecasts the GDP growth in FY27 at 6.7%. In addition, industrial activity was quite healthy, as manufacturing and service sectors grew by 9.2% and 10.0%, respectively. The non-food bank credit growth stood at 19.1% year-on-year as of July 2026.
Nevertheless, the matter of inflation continues to be an important topic of concern. The level of CPI inflation in July 2026 was recorded at 4.45%, whereas the level of food inflation was 5.52%. In addition, there is a risk of inflation breaching its projections due to increased monsoon deficit and strengthening of El Niño phenomena. As of August 26, 2026, the cumulative monsoon rainfall was 13% less than normal levels, while the planting of kharif was 2% less than the normal. Brent crude prices averaged US$90-US$93 per barrel in August 2026. In light of all these factors, PL Wealth emphasizes the potential of a 25-50 basis point policy rate increase in Q3/Q4 FY27, depending on crude oil prices and monsoon development.
Equity Markets: Selectivity and Valuations Drive Positioning
Indian equities saw contrasting results on the basis of capitalization during the month of August. Despite the continuing pressure on the Nifty 50, midcap and smallcap stocks exhibited some resilience. The Nifty 50 was trading at 24,208 on August 26, while the Nifty Midcap 150 was up 13.4% over one year on August 31, 2026, compared with a 1.4% fall in the Nifty 50.
The report states that earnings for Q1 FY27 have generally been ahead of expectations. In the universe covered by PL Research, PAT (excluding oil & gas) has grown 17% on a year-on-year basis, which is the highest growth since Q4 FY24, beating estimates by 2.6%. Sectors which posted earnings beats include banking, metals, telecom, and healthcare. High input costs might adversely impact corporate margins in the quarters ahead.
Valuations can be seen to lend some support to the medium- and long-term outlook. The Nifty was trading at 17.3 times 1-year forward earnings at 24,208, which is 11.7% lower than its 15-year average P/E multiple of 19.6 times. The base-case Nifty target by PL Research for the next 12 months is 27,123.
In the near-term, PL Wealth advises phased exposure to large and large and mid-cap strategies due to high crude oil prices and global interest rate uncertainty. In the medium-term, the report prefers exposure to large private banks, capital goods and durable consumption, along with exposure to select quality small cap, flexi-cap and multi-cap strategies. In the long-term, the positive outlook for India emanates from domestic capital spending, demographics, financial deepening, indigenous defense capabilities and growth potential.