Bernstein sees India earnings upgrades driving stocks momentum

A screen displays a broadcast of Narendra Modi, India's prime minister, outside the Bombay Stock Exchange (BSE) building in Mumbai, India, on Wednesday, May 7, 2025. Photographer: Dhiraj Singh/Bloomberg

Strategists at Bernstein Societe Generale Group recommended buying Indian stocks with upward earnings revisions to navigate the market’s lofty valuations.

While they had earlier favored low-volatility and value stocks, the brokerage’s strategists said the market has now reached a point where earnings revisions will drive momentum. The NSE Nifty 50 Index has gained more than 15% since a March low, and is trading at more than 21 times its forward earnings, above its 10-year average.

“Our whole thesis on India anchors on improving earnings revision as valuations are already stretched,” Asian quant strategists Rupal Agarwal and Cheng Zhang wrote in a note. “Earnings revision was the best performing style of 2024, and we have been waiting for the style to become attractive again — we now find ourselves at this juncture.”

Bernstein’s focus on earnings follows nearly three quarters of subdued corporate results, which had prompted investors to seek safety in defensive corners of the market. Tata Consultancy Services Ltd. is set to kick off the April–June earnings season on Thursday.

Bernstein recommends increasing exposure to the technology sector, noting that earnings downgrades there are at “record low levels” and likely bottoming out. The firm also expects materials, utilities, energy, and communication services to lead the next cycle of earnings upgrade.

Since the market’s March rally, “valuation support looks limited and leaves a bigger onus on earnings,” the strategists said.