The Indian market is currently trading at elevated valuations, with stocks at 19-20x FY27 earnings. Consensus expectations forecast 6-8% earnings growth in FY26 and a sharper 14-16% in FY27, with the latter contingent on the removal of an additional 25% US tariff. Chakri Lokapriya, CIO Equities at LGT Wealth India, provides a detailed sector-wise commentary, highlighting opportunities and risks for investors.

In the financial services sector, state-owned banks outperformed peers, though loan growth slowed and margins contracted. Nonetheless, the financial sector has remained a key driver of the 2025 market rally, with indices hitting record highs. The healthcare and real estate sectors are showing strong growth, with the healthcare sector expected to reach $610 billion by 2026, and India's real estate market projected to grow significantly to $1 trillion by 2030 and contribute 15.5% to GDP by 2047. However, broader industry data indicate a moderation in real estate demand in FY26, with market leadership consolidating towards larger, well-capitalized developers. The communication services sector exhibits steady performance, supported by average revenue per user (ARPU) growth and broadband momentum, though mobile subscriber additions have slowed due to industry balance sheet stress.

In the consumer discretionary sector, automotive companies benefited from premiumization and pricing discipline, though softer volumes and cost pressures constrained overall margins. Demand in footwear and electronics categories remained muted. In materials, steel producers saw a sequential improvement in profitability, but falling steel prices are expected to pressure margins. Cement companies reported robust profitability growth due to strengthened realisations in a seasonally weak quarter.

Market Signals

Sector-specific impacts and investment opportunities in Financial Services, Healthcare, and Real Estate.
Forecasted earnings growth in FY27, contingent on US tariff reduction.
Trend of market leadership consolidating towards larger, well-capitalized real estate developers.

Winners & Losers

State-owned banks and large real estate developers are set to benefit. Consumer staples companies face margin pressures. Telecommunication operators are experiencing balance sheet stress. The healthcare sector is seeing strong growth, particularly in domestic formulations.

Action Timeline

Immediate: Monitor US tariff negotiations, evaluate opportunities in the Financial Services sector.
Short-term: Prepare for margin improvement in the Consumer Staples sector in H2 FY26.
Long-term: Capitalize on expected growth in Healthcare and Real Estate sectors, focusing on key players.

Risk Assessment

Elevated valuations of the Indian market.
Uncertainty surrounding US tariffs.
Raw material cost pressures in the Consumer Staples sector.
Balance sheet stress in the Telecommunication sector.
Regulatory risks in the Media sector.