India's headline GDP growth of 8.20% may look impressive on paper, but equity markets are likely to focus more on earnings acceleration and valuation comfort in the coming period, according to IIFL Capital Services research leadership.

GDP Growth Reality Check

GV Giri, President and Head of Research at IIFL Capital Services, emphasized caution when interpreting India's reported GDP figures. The 8.20% real GDP growth has been supported by a compressed deflator, which may not reflect the complete economic picture.

High-frequency indicators suggest actual growth may be closer to 6.50-7.00%, with the acceleration being selective and led by automobiles and a few sectors following GST cuts.

Corporate Earnings Outlook for FY27

Giri expects corporate earnings to regain significant momentum in FY27, supported by both underlying growth and recovery in large companies. The Nifty has maintained underlying earnings growth of around 13-14%, but FY27 presents opportunities for enhanced performance.

The projected 16-17% Nifty earnings growth appears achievable through a double boost of normalisation and recovery in large companies, particularly airlines and banks.

Banking Sector Positioned for Strong Performance

Banks emerge as the biggest potential beneficiaries in the current economic cycle, according to Giri's analysis. The sector has experienced 125 basis points of rate cuts in 2025, combined with deregulation initiatives by the RBI and government.

Key Banking Sector Advantages:

• Rate Cut Benefit: 125 basis points reduction creating favorable conditions
• Regulatory Support: Deregulation by RBI and government
• Credit Growth: Expected pickup in loan growth
• Cost Management: Credit costs anticipated to remain low
• Margin Expansion: Second phase of rate repricing supporting margins

Private banks and NBFCs could experience strong earnings leverage, with some NBFCs already delivering over 30.00% EPS growth. Historically, banks have been spectacular outperformers during rate-cut cycles.

Valuation Concerns and Market Outlook

Despite positive earnings prospects, Indian equities face valuation challenges. At around 20.40 times earnings, India has not delivered sufficient growth to justify major re-rating compared to global markets.

Innovation-led earnings growth remains limited in India compared to global leaders in AI, robotics, and drug discovery.

Additional Sector Opportunities

Beyond financials, several sectors show improving fundamentals and earnings visibility:

• Cement: Enhanced volume and earnings visibility
• Hospitals: Improving operational metrics
• Pharmaceuticals: Strengthening earnings outlook
• Internet and Platform Companies: Sustained profit growth in companies like Swiggy and Zomato through scale and operating leverage

Giri expects Indian markets to maintain stability with mid-teen earnings growth, even if valuations limit near-term upside potential. Unless material negative developments occur, Nifty returns should broadly track the projected earnings growth of 15-17%.

IIFL Capital Services has issued a clarification regarding media reports about potential stake acquisition by private equity firm TPG Capital. The company addressed speculation about a significant minority stake transaction through an official exchange notice on Wednesday.

Company's Official Response

IIFL Capital, formerly IIFL Securities, stated that it explores "various strategic opportunities" from time to time in response to reports suggesting TPG Capital was considering acquiring a 30-40% minority stake in the company. The firm emphasized that as of the current date, there is no information or development requiring disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Media Reports and Speculation

According to media reports published on Wednesday, TPG Capital's eventual holding would depend on the stock tendered by minority shareholders in any potential open offer. The reports suggested the private equity firm was evaluating a significant investment in the financial services company, though no official confirmation had been provided by either party.

Current Shareholding Structure

The company's existing ownership structure reflects a diversified shareholder base with key institutional and promoter holdings:

Regulatory Compliance

The company's statement specifically referenced SEBI's listing regulations, indicating its commitment to maintaining transparency with investors and regulatory authorities. By clarifying that no disclosure-worthy developments have occurred, IIFL Capital has addressed market speculation while maintaining compliance with exchange requirements.

The clarification comes amid ongoing interest from private equity firms in India's financial services sector, though IIFL Capital has made clear that any strategic opportunities remain exploratory at this stage.