Mumbai, October 19, 2026: Bajaj Asset Management Limited has reported a significant reset in Indian equity market valuations since September 2024, with earnings and credit growth gaining momentum, according to its latest equity market outlook. The company noted that global uncertainties and high crude oil prices could continue to drive market volatility in the near term.
Valuations for large and mid-cap stocks have declined sharply from their 2024 peaks. The Nifty 50’s 12-month forward price-to-earnings (P/E) multiple dropped 31%, from 24.8x in September 2024 to 17.2x by September 2026. The Nifty Midcap 150 saw a 36% decrease, from 35.6x to 22.8x, while the Nifty Small cap 250 eased 7%, from 25.0x to 23.2x. India’s market capitalisation-to-GDP ratio is projected at 122% for FY27, down from its September 2024 high of 150%.
Earnings momentum and sector performance
Despite the correction in valuations, Bajaj AMC highlighted that earnings delivery remains crucial for market performance. The Nifty 50 index was down 8.09% year-on-year in September 2026, even as its forward 12-month earnings per share (EPS) estimate rose 9.62%. In Q1FY27, large-cap and mid-cap earnings growth both reached 23%, up from 10% in Q4FY26 for large caps. Nifty 50 profits increased 19% year-on-year, with commodity and telecom companies accounting for about 60% of incremental profits.
Bajaj AMC’s estimates project BSE 500 earnings growth at 17% in FY27 and 16% in FY28. For FY27, large caps are expected to grow 16%, mid-caps 19%, and small caps 28%. These figures are forecasts and not guaranteed outcomes.
Credit growth and sector outlook
Credit growth has broadened, led by corporate and SME lending, with infrastructure financing supporting demand from large industries. Banks have reported improved loan growth and stable asset quality, while non-banking finance companies have benefited from lower funding costs and healthy lending activity. Life insurers also recorded growth in the value of new business, particularly in traditional products.
“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,” said Sorbh Gupta, Head – Equity, Bajaj AMC. Gupta added, “Improving credit growth and valuations support the banking outlook. Banks where loans reprice faster than deposits may be better positioned.”
Sector-specific drivers and risks
Bajaj AMC identified key sector trends: banking and financial services are supported by credit growth and asset quality, though margins require monitoring; healthcare benefits from demand in hospitals, diagnostics, wellness, and contract research and manufacturing services; power and power equipment are driven by government capex, grid expansion, and sustainable-energy investment; automobiles see improved volumes and affordability but face margin pressures from raw material and currency costs; consumer staples show improved volume growth, with pricing power and cost control remaining important; information technology faces subdued demand visibility and potential AI-led disruption; pharmaceuticals benefit from domestic formulations and contract manufacturing, while US generics face tariff-related risks; and metals, oil and gas, and utilities are influenced by commodity prices and electricity demand.
Outlook and ongoing risks
Bajaj AMC cautioned that geopolitical tensions, crude oil prices, US interest rates, rupee movements, and foreign portfolio flows may keep near-term volatility elevated. The company said it remains focused on earnings visibility and valuations when assessing sector opportunities.
“Easing valuations and improving earnings offer a more supportive market backdrop, but global risks remain. Our focus is on selective opportunities, disciplined valuations and sustainable earnings growth,” Gupta concluded.
Bajaj Asset Management Limited, formerly Bajaj Finserv Asset Management Limited, is a wholly owned subsidiary of Bajaj Finserv Limited offering mutual funds, portfolio management services, and alternative investment funds, subject to regulatory approval.
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