Global growth is forecast to slow this year to 2.5 percent, the lowest rate since the COVID-19 pandemic, as higher energy prices, rising inflation, tighter monetary conditions, and weaker trade weigh on activity. Growth in advanced economies is forecast to slow this year, to 1.5 percent, from 1.8 percent in 2025. The United States – a large oil producer – is proving resilient to the disruptions in global energy markets, with the adverse impacts of the conflict expected to be offset by fiscal easing and continued AI-related investment.
Further, with inflation risks rising, expectations of rate cuts have receded, increasing the likelihood of interest rates remaining higher for longer. The US Federal Reserve, under the new Fed Chair Kevin Warsh, adopted a notably hawkish tone in its latest policy communication, although they kept policy rate unchanged in the July policy, the decision was not unanimous with 3 Governors dissenting in favour of a rate hike.
Inspite of the all the uncertainties, Indian economy has been growing steadily and Q1’27 has not shown any brakes on the growth trajectory. Factors which show the strength of Indian Economy even in current uncertain environment are as follows:-
- GST collection for July months grew by 15.4% to Rs 2.11 lakh Cr.
- Bank credit growth for July month stood at ~19%.
- Though headline CPI inflation stood at 4.45% in June due to food and fuel prices; core inflation remains controlled.
- After 40% deficit rainfall in June, July rainfall was slightly above normal, resulting in better kharif sowing.
- End to a strong result season, faster growth in the last 10 quarters.
The Nifty managed to close above 24000 after five months, ending 2.2% up M-o-M. After underperforming significantly during the first half of the 2026, the index has closed higher for the second successive month mainly led by reduced FII selling. After months of heavy selling, FII pressure in Indian equities has been easing steadily. From selling of over 1.15 lakh Cr in March 2026, which reduced to 71000 Cr in April to 50000 Cr in May and 35000 Cr in June, FIIs have turned net buyers in July.
What has changed? – Global flows which had flown to AI and tech-heavy markets like US, Taiwan and Korea seems to have reversed and we see this trend only strengthening in coming months and quarters.
The Q1’27 corporate earnings season concluded on a strong note, demonstrating widespread outperformance. The earnings growth for the broader markets were led by Financials, Metals, Pharma, Retail and Automobiles as well as sectors such as Chemicals, Textiles and Real Estate.
Nifty reported revenue growth of 19% (vs expectation of 16% growth) whereas PAT grew by 18% (vs expectation of 10% growth); highest growth seen in the last 10 quarters. Low base, rupee depreciation, high commodity price pass through and FY26 consumption stimulus (GST reduction, liquidity easing etc.) have propelled revenue growth higher.
However, some of the gains specifically in terms of margins may not continue in coming quarters – 1) Low-cost inventory benefit across many industries; 2) Rupee deprecation helped offset some of the input costs pressures and 3) Low base effect of Q1’26. Hence, extrapolating Q1’27 results for full year would not be right.
For our G+V portfolio, revenue growth for the quarter stood at 18% whereas EBIDTA grew faster and witnessed 23% growth, indicating that growth remains healthy with broad based outperformance.
Strong Macros: Following the moderation seen in 2025, systemic credit growth has rebounded to 18% YoY in Jul’26 (a two-year high), auto volumes are at their strongest levels since the 2022-23 peak, GST collections have consistently remained above INR 2tn, and IIP growth has accelerated to two-year high.
Reasonable Valuations: Nearly two years of range-bound performance in Indian equities and a strong rally in global markets, has widened the performance gap between Indian and Global Markets to near-historic levels. Further, the Nifty is trading at a 12-month forward P/E ratio of 18.9x, below its long-term average of 21x (at a 10% discount).
Small and Mid-caps in the BSE 500 index delivered a very strong quarter with their aggregate PAT growing by nearly 30%, outperforming large-cap profits for the 4th consecutive quarter.
Since we recognise that the “new & fast-growing” part of India is better represented by the mid & small caps rather than largecaps, we have shifted our exposure significantly towards Small and Mid-caps since the start of the year, with valuations becoming reasonable post 2-years of consolidation and growth as well as outlook improving across most sectors.
Result update of our portfolio companies is attached for your reference.
Happy Investing!!
