Smallcap-Midcap stocks still expensive, underperformance may continue till FY27: BofA

• Smallcap and midcap stocks are expected to continue underperforming until FY27, despite recent declines, as their valuations remain high.
• Indian market valuations are still elevated, and earnings growth has been modest, with Nifty's FY25 growth at 5.5% and FY26 projected at 7%.
• Bank of America Global Research notes a reduction in earnings downgrades, with their FY26 Nifty earnings growth estimate holding at 7%.
• Earnings growth is anticipated to improve in FY27 from a lower base, potentially reaching 8-9% for Nifty companies and 5-8% for large-cap IT firms.

Why It Matters: Indian smallcap/midcap stocks remain expensive, signaling continued underperformance till FY27.