HDFC Securities’ ‘The Big Review’ sees India growing strong in FY27, flags stock market opportunities

HDFC Securities has released the latest edition of The Big Review, a comprehensive assessment of the Indian economy and capital markets, offering strategic insights for FY27 amid global uncertainty, geopolitical tensions, and ongoing market correction. 

The report examines macroeconomic trends, sectoral opportunities, valuation dynamics, and investor behaviour while identifying potential recovery plays for long-term investors. 

India’s growth story remains resilient 

According to the report, India’s economy is expected to remain robust despite external headwinds. Real GDP growth is projected at 6.5% for FY26 and FY27 while nominal GDP may expand by 10–11%. 

The government is expected to continue its infrastructure-led growth strategy, with capital expenditure likely to account for 32% of total spending in FY27. Inflation is seen moderating to around 4.5% while the fiscal deficit target is pegged at 4.3%. 

Rupee faces continued pressure 

The report notes that the rupee remains under pressure, driven largely by weak foreign direct investment inflows. FDI has stood at $6 billion so far this year, significantly below historical levels of $38–44 billion. 

Foreign portfolio investors withdrew $18 billion in FY26 while persistent trade deficits continue to weigh on the currency. HDFC Securities believes the rupee depreciation cycle that began in 2022 is still in play. 

Earnings growth seen at 10% 

The broader market is pricing in earnings growth of around 10%, although sector-wise performance is expected to remain uneven. Banks, consumer discretionary, metals, and telecom may see modest improvement while the energy sector could face contraction. 

On valuations, the report says recent corrections have eased excesses, but midcap and small-cap segments remain relatively expensive. Median declines stand at 31.9% for the Midcap 100 and 39.3% for the Smallcap 100. 

Meanwhile, the Nifty 50’s trailing price-to-earnings ratio has moderated to 18.2, a level HDFC Securities considers close to historical accumulation zones. 

Preferred sectors for FY27 

The brokerage has recommended a “Growth at Reasonable Price” (GARP) strategy, focusing on quality growth companies available at fair valuations. It prefers sectors such as industrials, infrastructure, consumer discretionary, and real estate while remaining underweight on cement, chemicals, and oil & gas. 

The report added that the firm’s model portfolio has outperformed benchmark indices, with HDFC’s Premium Basket delivering a 2.3% return against the benchmark’s negative 8.1%. 

Retail investor activity in Indian markets continues to surge. Demat accounts have risen to 222.37 million, while 1.48 crore active equity traders were recorded in February 2026. SIP inflows into mutual funds have crossed ₹30,000 crore annually. 

IPO activity also remained robust in FY26, with 153 public issues raising ₹2,01,442 crore. Notably, nearly 38% of investors are below the age of 30, highlighting strong participation from younger investors. 

Recovery on the cards if geopolitical tensions ease 

The report has identified 10 stocks across sectors such as aviation, paints, and electronic manufacturing services that could benefit sharply if geopolitical tensions subside. 

Historically, markets have rebounded strongly after geopolitical shocks, delivering average gains of 16–17% within one month and 37–38% over six months, according to the report. 

According to HDFC Securities, Indian markets may be nearing the trough of the current correction. With valuations becoming more reasonable across segments, selective opportunities are emerging for long-term investors.