Elara's Harendra Kumar Sees Strong GDP Growth Prospects for FY27 Amid Resilient Macroeconomic Environment

Market Outlook Remains Resilient Amid Elevated Brent Prices

The broader macro backdrop remains resilient, despite elevated Brent prices posing a near-term risk to margins and earnings, according to Harendra Kumar, Managing Director at Elara Capital. In an interview with Moneycontrol, Kumar expressed his optimism about the market's prospects, citing expected GDP growth of 7 percent in FY27, CPI inflation of 4-4.5 percent, and limited risk of policy tightening.

Kumar expects FY27 earnings to rebound to mid-teens growth, setting the stage for a gradual market recovery. This rebound is expected to be driven by domestic-facing sectors such as consumption and BFSI, which are expected to continue their growth trajectory. The FMCG sector is also turning positive, with volume growth improving to high single digits in Q4.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The market levels today reflect the worst of the geopolitical risks and portend the formation of a base, with Nifty valuations finding support near 17.1x, close to post-COVID lows and around one standard deviation below the long-term average. While risks from elevated energy prices and limited ability to pass on higher input costs may lead to earnings downgrades in select pockets, the overall macro construct remains resilient.

From a portfolio perspective, Elara Capital remains constructive on domestic-facing sectors such as consumption and BFSI and is turning positive on FMCG. Power and metals are looking to generate more alpha in the medium term. The sector offers a compelling mix of growth and valuation, supported by a revival in consumption, improving working capital demand, and steady credit growth of around 13-14 percent.

Average oil prices in H1 and H2 FY26 were in the US$ 65-70 per barrel range, but April 2026 has seen a sharp increase to around US$ 101 per barrel. With uncertainty around the war, the reopening of the Strait of Hormuz, and supply disruptions in the Middle East, Elara Capital expects average prices to remain elevated in Q1 FY27.

On a softer base of FY26, Elara Capital continues to see a high possibility of FY27 earnings growth exceeding 10 percent, albeit with a cautious stance given evolving geopolitical risk. Domestic-facing sectors such as BFSI, Autos, and Consumption are likely to lead growth, supported by resilient demand trends.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

The BFSI sector offers a compelling mix of growth and valuation, supported by a revival in consumption, improving working capital demand, and steady credit growth of around 13-14 percent. Several large private banks are trading near decadal low valuations despite stable fundamentals and have underperformed in recent years, increasing the likelihood of a rotation.

NBFCs should benefit from improving consumer demand, stronger auto volumes in FY27, and the positive wealth effect from elevated gold prices, supporting the next phase of credit growth. Capital markets remain structurally strong, with retail participation at around 19 percent as of Q2 FY26, a 22-year high. SIP flows have nearly tripled to around US$ 3.5 billion over five years, growing over 20 percent in the past year, providing a steady domestic liquidity base and strong earnings visibility.

Over the past year, several real estate stocks have corrected sharply despite resilient premium housing demand, making current levels an attractive entry point rather than a cautionary signal. The Nifty Realty index has rebounded around 22 percent from its March lows. Key listed players remain focused on premium and luxury segments in Tier 1 cities, where demand visibility is strong.