New Delhi, September 11 (Daily Kiran) : A recent report indicates that Indian companies may experience a re-rating in the second half of the fiscal year, driven by a surge in earnings and a return of domestic institutional capital. The findings were shared in a report released on September 11, 2026.
According to Omnisci Capital, the current consolidation phase in the market should be viewed as an opportunity to gradually increase investments in stocks, rather than chasing recent performance. The report highlights potential opportunities in businesses benefiting from structural capital expenditure, energy transitions, and infrastructure development.
However, it also warns that some segments within mid-cap and small-cap stocks are still significantly overvalued. Investors are advised to selectively invest in high-quality growth companies, especially where valuations are comparatively lower.
The report emphasizes that opportunities are concentrated in sectors that can leverage continuous growth and operational leverage, available at favorable valuations. Key sectors include banking and financial services, infrastructure, and power and business services, all supported by strong credit growth, rising electricity demand, and improvements in corporate capital expenditures.
As valuations of Indian stocks soften, institutional investor interest has begun to rise again. After two years of declining valuations, foreign investors have become net buyers on several occasions.
The domestic economic foundation remains robust, with real GDP growth projected to be around 7% for the fiscal year 2026-27, although caution is advised regarding crude oil prices.
The report also notes that escalating military tensions between the U.S. and Iran have dealt a significant blow to hopes for a long-term diplomatic resolution.
Ashwin K. Shami, President and Chief Portfolio Manager at Omnisci Capital, stated, “Many years of potential earnings growth have already been fully priced into stock valuations. This has left potential returns closely aligned with the discount rate, posing a serious risk of a sharp decline in valuations.”
The firm observed significant discrepancies in valuations among companies of varying market capitalizations. The Nifty Smallcap 250 and Nifty Midcap 150 are trading at trailing P/E ratios of approximately 34 times and 30 times, respectively, while the Nifty 100 is around 20 times.
Global stock markets continue to face high risk-free interest rates, with the U.S. 10-year Treasury yield hovering near a one-year high of 4.6-4.7%. Additionally, geopolitical tensions have increased volatility in crude oil and other commodities.
The upcoming policy decision by the U.S. Federal Reserve on September 16 is expected to be a key factor influencing Treasury yields and global risk appetite in the near term.
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