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Earnings cuts, capex delay loom as oil stays high: NomuraAurodeep Nandi, India Economist and Executive Director at Nomura, has trimmed India’s FY27 real GDP growth estimate to around 7%, while raising inflation forecasts.By Nigel D'Souza   |  Reema Tendulkar   |  Prashant Nair  March 25, 2026, 12:42:23 PM IST (Published)7 Min ReadSaion Mukherjee, MD & Head of Equity Research at Nomura, indicated that while the recent correction has improved risk-reward, further downside of around 5–7% cannot be ruled out before a more durable recovery sets in.

Mukherjee noted that the brokerage has lowered its Nifty year-end target to 24,900, factoring in the possibility of a mid-to-high single-digit cut in earnings. This is largely driven by expectations of crude oil prices remaining elevated around $90–$95 for a sustained period, which could spill over into the broader economy through inflation, fiscal pressures, and weaker corporate profitability.

He also cautioned that ongoing geopolitical uncertainties could delay the recovery in private capital expenditure, which had just begun to show early signs of revival. In this environment, Nomura remains selective, favouring sectors such as IT services, pharmaceuticals and select manufacturing segments where valuations have corrected and medium-term opportunities remain intact.

On the macro front, Aurodeep Nandi, India Economist and Executive Director at Nomura, has trimmed India’s FY27 real GDP growth estimate to around 7%, while raising inflation forecasts.

He expects the Reserve Bank of India to stay on hold for now, given the supply-side nature of the shock, though a sharper rise in crude prices could complicate the policy outlook further.

These are edited excerpts of the interview.

Q: About 10 days back you lowered the target price, the Nifty year-end target price to 24,900 versus 29,300. So to get to 24,900 base case, what are you assuming in terms of crude prices and the impact on earnings?

Mukherjee: We are looking at somewhere around 7% reduction in earnings, assuming that crude prices remain elevated for half the year. Now of course, if it's extends for the full year, the impact would be quite high.

Today most people are expecting the nominal GDP to grow at something like 10-11% and if I look at the consensus expectation on earnings, it's around 16%. Now the question is, can we beat nominal GDP by that much of a margin? We were at a cyclical upturn, if I look at last quarter's earnings, there were signs of pickup even in corporate capex, so that upturn could have helped us beat nominal GDP by a fair bit.

Now that some gets stalled, because of this uncertainty. Therefore, I feel that we may see earnings cut even if this thing gets resolved, because there would be a lingering tension out there. So, to that extent, we think that somewhere around mid to slightly higher single digit earnings cut is a possibility. So that's what gets factored in our target price that you mentioned.

Q: When you say true prices will be elevated for the first for at least half the year, you are looking at $80-90?

Mukherjee: Around $90. Our view is that, let's say, if you get crude somewhere around $80 or $85 the damage can be contained within the oil and gas ecosystem. The OMCs maybe taking all the burden, but the moment it's above $85 it sort of starts spilling over into the economy in terms of, let us say, excise duty cuts, which sort of impacts the fisc or eventually translates into higher prices at the retail level. We are factoring in somewhere, if you ask me, somewhere around $90-95 as the number.

Q: Given the damage to markets, what are you telling clients, are things at attract attractive levels of their interest?

Mukherjee: It's very difficult to take a call, but if we just look back, let's say the situation which was there during the start of the Russia Ukraine war, the market bottomed at somewhere around just below 17 times one year forward. Earnings today, we are at just above 17.5 times. So we have seen around 10% correction. And if I remember correctly, that time, it was around 13%. In that context, the markets kind of bottomed along with the peak that we had on crude that time.

From a risk reward perspective, if we were to believe that eventually this is going to sort of settle, and we would have a lower crude oil price, the risk reward looks attractive. So maybe we can argue for a 5-7% downside from the from the current level, and then we can build from there. But just from a geopolitical perspective, this is a lot more concerning, let us say, compared to the Russia Ukraine crisis. Because, we are talking about almost 20% of oil and gas trade is flowing to the state of almost that compares to 8 to 10% contribution that Russia had, and that time we didn't have supply disruptions. So now you have situations where some industries are getting impacted because of availability of gas, for instance.

From that perspective, it's more concerning. If this were to stretch longer, then we may have to deal with somewhat of a lower valuation than what we had in the past. So that's my concern here. But yes, if we were to factor in a resolution, then definitely the risk reward looks sort of better at a market level from here.

Q: Give us just four or five names or sectors where there is value already?

Mukherjee: We haven't really changed much of our sector. From portfolio, construct perspective what we said at the start of the year is that it's been a narrative driven market for a while. So, things gets priced in very, very quickly. For instance, if you see last year we had a very strong return in auto sector, so we saw cyclical recovery, and you saw upgrade in earnings and the valuations going up very fast, and then you start seeing sort of fatigue setting, and even if the companies are delivering numbers, it doesn't really translate into equity returns.

Our approach has been more selective, more valuation focused, and just not carry on with the narrative. That construct, still sort of remains as we go through this period of volatility. So, some of the segments, for instance, IT services pharmaceuticals, which have not done well over the past, few years, are the ones where we are constructive. We have taken a view let's say on let's say IT services that AI would be an opportunity at some point in time, and the investors would start looking at, this more constructively than what they are looking at today.

Similarly, pharma, we have seen generic cycle going through, there's not much expectation out there, and there are opportunities, not only in the US, but outside US. Similarly, areas within manufacturing, like auto components, EMS, these are the areas where the stock that bottom up we like, or we have seen significant correction in valuation, because narrative is not necessarily that constructive.

Q: What's the real GDP estimate, have you cut it?

Nandi: Yes, by 10 basis points to 7% for FY27.

Q: What does it do to, what the RBI does and, the rupee is the other one or you think it's overshot, and all this stuff stabilises?

Nandi: For RBI, this is an unenviable quadrant to be in. Do you focus on inflation, which is going to be the first hit in such a shock or, if you focus on inflation, then you might risk growth? Our call is that, if this is the baseline our inflation forecast, we have raised it from around 3.7-3.8% to 4.5%. Again, because you have coming from Goldilocks conditions, you have a longer runway for the RBI. So, we think RBI will keep rates on hold for now, because it is a supply side shock, why do you have to hike at this point. However, if the inflation impact is much more, for instance, if you're talking of a crude of $100 and the government is forced to pass on prices, then we could be in a rate hike situation. But as of now, I think it's, it's sort of worth holding.

For the entire discussion, watch the accompanying video

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