India Inc is projected to deliver a compound annual growth rate (CAGR) of approximately 15 per cent in corporate earnings between FY26 and FY28, according to a report by Motilal Oswal Financial Services Ltd. (MOFSL) released on Monday, 7 July 2025. The outlook is underpinned by improving macroeconomic conditions, easing geopolitical concerns, and stronger earnings visibility across sectors.

Why the Outlook Is Turning Constructive

According to the MOFSL report, India is entering a more favourable phase after nearly two years of market consolidation. Easing energy prices, improving macroeconomic stability, and strengthening corporate fundamentals are together creating a constructive environment for Indian equities over the medium term.

Notably, the brokerage flagged that attractive domestic valuations could position Indian equities to benefit from a potential rotation of global capital away from artificial intelligence (AI)-focused sectors — a shift that several global fund managers have begun signalling.

Q1FY27 Earnings: OMCs Cloud the Picture

For the June quarter (Q1FY27), MOFSL expects aggregate earnings across its coverage universe to decline 3 per cent year-on-year, largely due to weakness in oil marketing companies (OMCs). However, stripping out OMCs, profit after tax (PAT) is projected to grow 14 per cent year-on-year — signalling that the broader earnings momentum remains healthy. This pattern of OMC-driven distortions masking underlying corporate health is not new; it has recurred in multiple quarters over the past two years.

Sector-Wise Breakdown

Financials and metals are expected to lead earnings growth in the quarter. Lending non-banking financial companies (NBFCs), private and public sector banks, technology, capital goods, retail, consumer durables, and building materials are also forecast to post healthy performances.

In contrast, the oil and gas, automobile, healthcare, and cement sectors are likely to act as drags on overall earnings growth during the period, the report noted.

Key Risks Investors Should Watch

The brokerage highlighted two critical variables that investors should track in the coming months: the direction of foreign institutional investor (FII) flows and the market's capacity to absorb a robust pipeline of initial public offerings (IPOs) and capital-raising activity without straining liquidity. A surge in primary market supply alongside uncertain FII sentiment could test secondary market resilience.

Long-Term Fundamentals Intact

Despite near-term sector-level headwinds, MOFSL maintained that India's long-term growth fundamentals remain intact. The next phase of the market rally, the report argued, will be driven increasingly by company-specific earnings performance and execution quality rather than broad macro tailwinds or index-level momentum. This marks a meaningful shift from the liquidity-driven expansion seen in prior years.