BofA cuts India's Nifty 50 earnings forecast as stagflation fears rise

April 6 (Reuters) - BofA Securities has slashed its earnings growth forecast on Monday for India's benchmark Nifty 50 .NSEI companies for fiscal year 2027 to 8.5%, down from 14% projected before the Iran conflict, citing rising stagflation risks.

Brent crude prices hovering near $110 per barrel could strain India's import bill, given its position as the world's third-largest crude importer, and put pressure on corporate margins.

Here are some details:

In its base case, BofA assumes crude prices at $92.5 per barrel and has lowered India's FY27 GDP growth estimate to 6.5% from 7.4% earlier

In a worst-case scenario involving a prolonged Middle East conflict, GDP growth can slide to 3%, while earnings growth may drop to zero in fiscal year 2027

The Nifty 50 index is currently trading close to long-term average valuations. A potential resolution to the Iran conflict could trigger a 15% upside

BofA, however, expects the index to continue underperforming its emerging market peers due to relatively expensive valuations

The brokerage has set Nifty target for December-end at 26,200, compared with its current level of 22,663

The brokerage projected opportunities within large-caps and select themes in broader market after correction

Downgrades rate-sensitive sectors like mid-sized private banks, non-bank lenders, real estate, and automobile companies to "underweight" from "overweight" earlier

BofA prefers energy- and rate-hike beneficiaries such as large private sector banks and state-owned lenders