Speaking on the sidelines of “The Big Review” report launch in Mumbai, Relli said elevated oil prices are creating a cascading impact across inflation, interest rates, and corporate earnings, affecting economies worldwide.
However, he remains hopeful that easing geopolitical tensions in West Asia could bring some relief through improved supply chains and softer oil prices.
“Markets tend to have a short memory. Once stability returns, focus will shift back to domestic drivers such as consumption, monsoon, and economic growth,” he noted, while cautioning that global volatility may persist if crude prices remain elevated.
India macro remains resilient
Despite global headwinds, India’s macroeconomic outlook continues to remain stable. The recent policy stance by the Reserve Bank of India reflects a calibrated approach, with only a marginal moderation in GDP growth expectations to around 6.9%.
While some agencies have trimmed growth forecasts slightly, the broader outlook remains intact. India is still expected to deliver real GDP growth of around 7%, with nominal GDP growth in the range of 10–11%, supported by moderate inflation of 4–5%.
Earnings growth to moderate but stay healthy
On the corporate earnings front, expectations have been revised lower. Growth projections for FY27, which were earlier in the 14–15% range, are now likely to moderate to about 10–12%, largely due to elevated crude oil prices.
Relli cautioned that if oil sustains above $100 per barrel, it could further pressure earnings. However, he remains confident that India will continue to deliver double-digit earnings growth.Importantly, the nature of earnings growth is expected to improve. Unlike the previous year, FY27 could see a more broad-based recovery, with a larger number of sectors and companies participating in the growth cycle.
Valuations improve; risk-reward turns favourable
One of the key shifts in the market, according to Relli, is the improvement in the risk-reward equation.
Heavy selling by foreign portfolio investors in recent months was largely driven by valuation concerns, particularly in mid- and small-cap stocks. However, the correction over the past 18–20 months—both in terms of price and time—has brought valuations closer to long-term averages.
“As a result, downside risks appear limited even in adverse scenarios, while upside potential remains meaningful,” he said.
Stock picking to dominate next phase
The current environment is increasingly conducive to bottom-up investing. Markets have been stock-specific over the past 18 months, and this trend is expected to continue.
However, the opportunity set has now widened. With valuations becoming more reasonable and earnings visibility improving, investors have a larger pool of stocks to choose from.
From its coverage universe of over 270 companies, HDFC Securities is identifying multiple opportunities with attractive upside potential.
Monsoon remains a key variable
While macro conditions remain supportive, Relli flagged the monsoon as an important variable to monitor.
A normal or above-average monsoon would boost rural demand and overall sentiment, while any significant shortfall could weigh on consumption and growth.
FY27 outlook: From caution to opportunity
Overall, Relli believes that most macro indicators for India remain favourable, positioning FY27 as a potentially strong year for markets.
Through the latest edition of “The Big Review”, HDFC Securities aims to provide a comprehensive outlook covering global and domestic macro trends, sectoral opportunities, and investor behaviour.
The report will also delve into domestic institutional flows, foreign investor trends, and identify a “bounce-back” basket of stocks that could benefit from improving macro conditions.
What Should Investors Do?
While near-term uncertainty persists, improving valuations, resilient macros, and a favourable risk-reward setup suggest that the market may be transitioning toward the next phase of growth.
For investors, the focus is likely to remain on selective stock picking, rather than broad market moves, as opportunities emerge across sectors.
(Note: The journalist was invited to the event)