HDFC Securities: Stronger Earnings Won't Guarantee Big Returns Next Year

• HDFC Securities' Varun Lohchab projects 12-13% earnings growth for 250 stocks in FY27, up from 10% in FY26.
• FY27 growth is expected to be driven by BFSI, IT, and Consumer sectors, which constitute 60% of the market.
• These key sectors traditionally trade at higher P/E ratios, indicating better quality earnings for FY27.
• Despite improved earnings, valuations will limit Nifty's upside to 8-10% over the next 6-12 months from 26,000.
• HDFC advises buying on dips and a stock-specific approach; overweight on financials, reducing underweight on consumer staples and IT.

Why It Matters: Improved earnings quality in FY27 may not translate to significant market returns due to high valuations.