India equity valuations reset 31% from 2024 peak as earnings rebound: Bajaj AMC
Synopsis
Indian equity valuations have undergone one of their sharpest resets in years — the Nifty 50's forward P/E has shrunk 31% from its 2024 peak — yet corporate earnings are accelerating, with BSE 500 growth projected at 17% in FY27. Bajaj AMC's analysis points to a market where the multiple-expansion story is over and earnings delivery is now the only game in town.
Key Takeaways
Bajaj AMC projects BSE 500 earnings growth at 17% in FY27 and 16% in FY28 .
The Nifty 50's forward P/E has compressed 31% , from 24.8x in September 2024 to 17.2x by September 2026.
India's market cap-to-GDP ratio stands at an estimated 122% for FY27, down from a peak of 150% in September 2024.
Large-cap earnings growth surged to 23% in Q1 FY27 , up from 10% in Q4 FY26; mid-caps also grew 23% .
Banking, healthcare, and power equipment are flagged as structurally supported; IT sector faces caution on AI disruption and demand uncertainty.
Global uncertainties and elevated crude oil prices could keep near-term market volatility elevated, the report warned.
Domestic equity valuations have cooled sharply from their September 2024 highs even as corporate earnings and credit growth are building fresh momentum, according to a report by Bajaj Asset Management Company (Bajaj AMC) released on Saturday, 24 October 2026. The report projects BSE 500 earnings growth at 17% in FY27 and 16% in FY28, signalling a broadening recovery across market segments.
Valuation Reset Across Market Caps
The Nifty 50's 12-month forward price-to-earnings (P/E) multiple has contracted by 31%, falling from 24.8x in September 2024 to 17.2x by September 2026, according to the Bajaj AMC report. The correction has been even steeper in broader markets — the Nifty Midcap 150 saw its forward P/E compress by 36%, from 35.6x to 22.8x, while the Nifty Smallcap 250 eased 7%, from 25x to 23.2x.
Notably, India's market capitalisation-to-GDP ratio is estimated at 122% for fiscal 2027, a meaningful step down from its September 2024 peak of 150%, though still elevated by historical standards.
Earnings Growth Forecasts by Segment
Bajaj AMC's report projects earnings growth of 16% for large caps, 19% for mid-caps, and a notably higher 28% for small caps. Early data from the current earnings cycle is supportive: large-cap earnings growth accelerated to 23% in Q1 FY27, up sharply from 10% in Q4 FY26, while mid-cap earnings also grew 23%. Nifty 50 profits rose 19% year-on-year, with commodity and telecom companies contributing roughly 60% of incremental profit growth.
The report also flagged a telling divergence: the Nifty 50 was down 8.09% year-on-year in September 2026, even as its forward 12-month earnings per share (EPS) estimate rose 9.62% — a gap that suggests the market has de-rated despite improving fundamentals.
Sector Outlook: Winners, Laggards and Risks
Banking and financial services are highlighted as well-positioned, supported by broadening credit growth and stable asset quality. Healthcare and power equipment are identified as structural opportunities driven by long-term demand drivers.
Information technology, however, draws caution from the report. Subdued demand visibility, global policy uncertainty, and potential disruption from artificial intelligence are cited as headwinds warranting a more careful approach to the sector.
Macro Risks and the Road Ahead
Sorbh Gupta, Head of Equity at Bajaj AMC, struck a measured tone. 'Valuation multiples have eased from recent highs, but the market capitalisation-to-GDP ratio remains elevated. Sustained earnings growth will be important for market performance ahead,' he said.
The report warned that global uncertainties and elevated crude oil prices could keep markets volatile in the near term. This comes amid a broader global repricing of risk assets, making earnings delivery — rather than multiple expansion — the primary driver of returns in the cycle ahead.
Point of View
But the market cap-to-GDP ratio at 122% is still not cheap by emerging-market standards. The more significant signal is the divergence between falling prices and rising EPS estimates — historically a setup that rewards patient equity investors. The risk, as always, is execution: small-cap earnings projections of 28% carry a wide confidence interval, and the IT sector's AI-disruption overhang is structural, not cyclical. If crude stays elevated and the Fed stays hawkish, the earnings upgrade cycle could stall before it fully materialises.
NationPress
24 Oct 2026
Frequently Asked Questions
What does the Bajaj AMC equity report say about India's market valuations?
The Bajaj AMC report says Indian equity valuations have reset significantly from their September 2024 highs, with the Nifty 50's forward P/E falling 31% from 24.8x to 17.2x by September 2026. India's market cap-to-GDP ratio has also declined to an estimated 122% for FY27, down from a peak of 150%.
What is the earnings growth forecast for BSE 500 in FY27 and FY28?
Bajaj AMC projects BSE 500 earnings growth at 17% in FY27 and 16% in FY28. Segment-wise, the report forecasts 16% growth for large caps, 19% for mid-caps, and 28% for small caps.
Which sectors does Bajaj AMC favour and which does it caution against?
The report is positive on banking and financial services, healthcare, and power equipment, citing credit growth, stable asset quality, and structural demand. It urges caution on IT, flagging subdued demand visibility, global policy uncertainty, and potential disruption from artificial intelligence.
Why is the Nifty 50 down year-on-year even as earnings estimates are rising?
According to the Bajaj AMC report, the Nifty 50 was down 8.09% year-on-year in September 2026 even as its forward 12-month EPS estimate rose 9.62%. This reflects a de-rating of valuation multiples — the market is pricing stocks lower despite improving earnings, suggesting improved value for investors willing to hold through near-term volatility.
What risks could derail India's equity recovery, according to the report?
The report warns that global uncertainties and elevated crude oil prices could sustain near-term market volatility. IT sector headwinds from AI-led disruption and policy uncertainty are also flagged as risks alongside the still-elevated market cap-to-GDP ratio.
