- Bernstein has flagged the upbeat commentary around the financial performance of Indian listed companies in the first quarter of fiscal 2027 as a sign of a durable improvement, arguing that some temporary factors have been treated as permanent achievements.
- The report highlights eight distortions including subsidies, GST cuts, external borrowings, and an upcoming wage revision, which may be temporarily impacting corporate earnings.
- Bernstein notes that the country’s three largest OMCs reported combined losses of about ₹18,000 crore, making headline PAT growth appear stronger than the underlying performance.
- NSE 200 earnings grew by just 8% in the June quarter, while revenue growth for the same stocks stood at around 12%, making it the strongest topline growth quarter over the last 10 quarters.
- Bernstein maintains its Nifty target at 26,000 points, arguing that growth driven by distortions may not lead to strong equity returns.
- Bernstein cautioned that growth supported by such distortions may not necessarily translate into strong equity-market returns.
- Garre pointed to the impact of production-linked incentive (PLI) schemes, noting that only a limited number of companies have benefited from them.
- Bernstein's report described income-support schemes as measures that could create a 'moral hazard' by affecting labour productivity.
Bernstein's recent report on India's corporate performance for Q1 FY27 highlights a complex landscape where apparent growth is influenced by temporary factors rather than sustainable market forces.1
The report, authored by Venugopal Garre, emphasizes that the positive commentary surrounding earnings often overlooks critical elements such as profit after tax (PAT) excluding oil marketing companies (OMCs).
Garre noted that the three largest OMCs reported combined losses of about ₹18,000 crore, which skews the perception of overall profitability.
Bernstein attributes some demand improvements to pent-up demand and preemptive purchases ahead of expected price hikes, particularly in the passenger vehicle segment where companies refrained from raising prices despite weak margins.
The report also questions the sustainability of earnings growth, linking it to government transfers and production-linked incentive (PLI) schemes that benefit only a limited number of firms.
“If distortions are shaping earnings, valuations and capital flows, investors should focus less on whether they agree with them and more on identifying who benefits while they persist,” the report states.
Bernstein's analysis reveals that NSE 200 earnings grew by just 8% in the June quarter, with revenue growth at around 12%, marking the strongest topline growth in ten quarters.5
The firm maintains its Nifty target at 26,000 points, cautioning that growth driven by distortions may not yield high equity returns for the broader market.
“The report, authored by Venugopal Garre, highlights eight distortions including OMC losses of about ₹18,000 crore that inflate PAT growth. It also notes NSE 200 earnings grew only 8% in June quarter, with 78% of consumer companies reporting no or minor price hikes.”
