Indian Stock Market Valuations: The Road Ahead

As the Indian stock market enters the December-quarter results season, all eyes are on the earnings growth of the Nifty companies. According to a recent note by brokerage JPMorgan, the Nifty earnings growth is expected to be around 7% annually, while JPMorgan’s coverage universe is expected to see a growth of 9%.

Key Sectors to Watch

Materials, Energy, and Industrials are expected to lead the profit growth, while Financials, Pharma, and Gas utilities are likely to be the drags. The IT services sector continues to be weak, although deal-to-revenue conversion is improving, offering some visibility for later quarters. The December quarter is also the first full period after GST cuts, making management commentary on demand and pricing especially important.

For more information on the GST cuts and their impact on the Indian economy, read our previous article.

JPMorgan’s Outlook

JPMorgan believes that the worst of earnings downgrades is behind, with MSCI India earnings forecast to grow 13% in CY26 and 14% in CY27. The brokerage has kept its Nifty targets unchanged at 30,000 (base), 33,000 (bull), and 24,000 (bear) and prefers domestic-facing sectors over exporters, given the uncertain global backdrop.

For a detailed analysis of the Nifty targets and their implications for investors, click here.

Margins to Recover Modestly

Margins are expected to recover modestly, with Nifty EBITDA margin rising 88 basis points quarter-on-quarter and JPM-covered companies by 36 basis points, helped by easing input costs and operating leverage. Nominal GDP growth is projected to improve to 9–9.5%, supporting earnings momentum.

To understand the concept of EBITDA margin and its significance in stock market analysis, read our informative article.

Valuation Comfort

Valuation comfort, according to JPMorgan, hinges on whether earnings can re-accelerate beyond single digits as macro tailwinds build. With inflation easing, GST cuts flowing through, and domestic demand stabilizing, the brokerage expects consumption, construction, and capex-linked sectors to show the earliest signs of operating leverage.

For an in-depth analysis of the macro tailwinds and their impact on the Indian stock market, click here.

Investor Strategy

For investors, JPMorgan recommends staying tilted toward domestically driven businesses with pricing power and volume visibility, while being cautious on export-heavy sectors exposed to global growth and currency swings. Stock selection, it says, will matter more than broad index moves as markets transition from multiple-driven gains to earnings-driven performance.

To learn more about stock selection strategies and how to make informed investment decisions, read our expert guide.