India’s earnings breadth widens, valuations improve: Report

New Delhi: India’s Q1 FY27 corporate earnings hit ten‑quarter high and foreign institutional investors in August returned with their strongest monthly inflow since September 2024, a report said on Monday, even as equity valuation comfort improves.

“Indian equities are no longer uniformly expensive, with large-cap valuation comfort improving even as pockets of the broader market stay demanding. India's valuation premium to emerging markets has compressed to 20 per cent, near a decade low,” the report from PL Asset Management said.

Nifty PAT grew at its fastest pace in 10 consecutive quarters, prompting many brokerages to raise FY27 estimates, while the mid-cap PAT grew even higher up 20 per cent YoY, small-cap PAT up nearly 28 per cent

Mid‑ and small‑cap stocks led gains even as the Nifty 50 slipped 1.24 per cent amid a hawkish Fed, a surging gold price and an Nvidia-led revival in global AI sentiment.

"Sector leadership was broad: capital goods, autos, metals, financials and healthcare all beat, while IT, chemicals and real estate lagged," the report said.

"That breadth doesn't happen by accident; it reflects a genuinely running investment cycle, with Gross Fixed Capital Formation growing 11.9 per cent in real terms," said Siddharth Vora, Head – Quant Investment Strategies & Fund Manager, PL Asset Management.

Domestic institutional investors extended a 38‑month net buying streak in August while foreign institutional investors' huge inflow helped offset roughly Rs 2.1 lakh crore of selling earlier in the year.

"Stocks with meaningful foreign holding have grown from 900 to 1,300 over four years, even as aggregate foreign ownership sits near a multi-year low as a share of market cap — rotation and re-engagement rather than a wholesale return, leaving more room than usual for incremental buying to move price," the report noted.

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