The Nifty, which traded at 24‑25x earnings in September 2024, is now hovering around 15.5x based on an estimated FY28 EPS of ₹1,410— a 38% contraction that has loosened the top‑end of the index.
Large corporates’ lag in AI investments kept R&D budgets below 1% of revenue, a self‑inflicted drag that contributed to the 2024 over‑valuation. That misstep has now created a two‑tier market: small‑ and mid‑cap names justify multiples above 20x, while IT services and FMCG, posting single‑digit EPS growth, remain priced at lower multiples.
Sector‑specific upside is clear: defense firms forecast revenue to double or triple in the next three years; solar players aim for ₹35,000‑₹40,000 crore in top line, with EBITDA climbing to ₹8,000 crore, roughly triple current levels. Contract manufacturers such as Laurus Labs and Sai Life Sciences are ramping up CAPEX, echoing a shift that could lift their valuations.
Gurmeet Chadha, Managing Partner and Chief Investment Officer at Complete Circle, urged investors to focus on the price‑to‑earnings‑to‑growth ratio. "When there is pain is when you get good prices," he said, highlighting the potential for value plays in the backdrop of a corrected market.
Looking ahead, the index’s lower valuation base offers a cushion for a rebound if growth‑oriented sectors rebound. Investors should monitor quarterly earnings releases, especially from defense and renewable energy names, as the market digests the 2024 correction. The BSE and NSE will likely see increased trading in these themes as the next quarter unfolds.