BofA sees FY27 earnings growth slowing to 8.5%; capex outlook stays strong

BofA Global Research expects India Inc’s earnings growth to remain much weaker than broader market expectations in 2026-27 (FY27), as companies face pressure from higher commodity prices, geopolitical tensions and slowing demand conditions.

Amish Shah, Head of India Research at Bank of America Global Research, said the brokerage forecasts earnings growth of 8.5% for FY27, well below the Street’s estimate of around 15%.

“We are already working with 8.5% earnings growth, which is much weaker than the 15% that we have from the consensus,” Shah said. He added that every quarterly earnings season could lead to further cuts in market expectations.

According to Shah, corporate India is becoming increasingly cautious about the first half of FY27 due to the West Asia conflict, elevated commodity prices, possible El Niño impact and the risk of higher interest rates. He said consumer-facing companies are likely to face more pressure than business-to-business companies because they are struggling to pass on rising costs through price hikes.



At the same time, Shah said the government does not appear willing to reduce capital expenditure despite concerns around fiscal deficit targets. Policymakers, he said, are focused on maintaining growth momentum by continuing infrastructure and investment spending.

“There is no curtailment that they are expecting,” Shah said while referring to government capex plans. Instead, policymakers are exploring ways to improve subsidy efficiency and reduce leakages without slowing investment activity.

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Energy security has also emerged as a major policy focus. Shah said policymakers are discussing multiple areas, including biofuels, coal gasification, electrification and oil & gas exploration to reduce long-term energy risks.

He added that electric vehicle demand has strengthened significantly after the West Asia conflict, with some automakers already facing supply-side constraints and discussing production expansion plans.

On foreign investors, Shah said global investors continue to stay engaged with India, but near-term foreign inflows may remain weak as investors wait for more attractive valuations and better clarity on growth.

In the technology sector, Shah said enterprise spending on artificial intelligence (AI) is picking up faster than expected. According to him, large IT companies now believe revenue growth has bottomed out, and AI-led investments could gradually improve demand trends.

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“Enterprise AI investments… have started faster than what they would have expected,” Shah said.

BofA continues to remain positive on themes linked to energy security, defence, shipbuilding, data centres and industrial capex, especially if government spending remains strong over the coming years.

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