PGIM India Expert Predicts Robust Corporate Earnings Growth for 2026-27
Mohit Khanna, Portfolio Manager for Portfolio Management Services at PGIM India Asset Management Company, has expressed confidence that Indian corporations are poised to deliver healthy earnings growth in the years 2026 and 2027. In an exclusive interview, Khanna highlighted that India's corporate earnings are entering a fascinating phase characterized by non-uniform growth patterns across different market segments.
Budget 2026 Expectations: Focus on Manufacturing and Infrastructure
Regarding the upcoming Budget 2026, Khanna anticipates the government will prioritize manufacturing and infrastructure development. "There is a definite need for accelerated job creation within the economy," Khanna emphasized. "Therefore, I am expecting a budget focused on manufacturing and infrastructure creation, which will ultimately lead to increased employment in the economy."
While acknowledging the government's remarkable achievement in lowering the fiscal deficit, Khanna suggested a potential change in stance might be warranted. "The global trade remains uncertain due to the ongoing geopolitical slugfest; hence, it becomes imperative to spend a bit more to support internal economic growth," he explained. "A tad higher fiscal deficit or inflation would be supportive of nominal GDP growth."
Navigating Market Volatility Amid Geopolitical Uncertainty
Addressing the unprecedented level of geopolitical and external news flow impacting markets in recent weeks, Khanna acknowledged the resulting volatility. "There have been a lot of distractions in the markets that have led to sharp reactions by investors," he noted, pointing to strong performances in precious metals and currency fluctuations as outcomes of this uncertainty.
To navigate this challenging environment, Khanna's team focuses on two critical factors:
- Asset allocation
- Stock selection
"We have consciously diversified our portfolio and paired it with a thoughtful position sizing discipline," Khanna revealed. "This has allowed us to allocate capital to a large set of sectors and sub-industries, which are sometimes uncorrelated as well."
Simultaneously, they employ a bottom-up portfolio construction approach through individual stock selection, emphasizing:
- Earnings growth
- Cash flow generation
- Margin expansion
- ROIC (return on incremental capital) expansion
Earnings Outlook: A Multi-Speed Growth Story
Looking ahead to CY26 performance expectations, Khanna stressed that performance should be driven by earnings. According to Bloomberg consensus estimates for CY25-CY27, India's corporate earnings present a multi-speed growth story across different market segments.
"While some segments promise stability, others are gearing up for explosive growth, and a few will test investor patience before rewarding conviction," Khanna observed. "If one is planning their portfolio for the next three years, understanding these dynamics is critical."
The earnings projections reveal distinct patterns:
- Large caps: Projected at 16% YoY growth in CY25E, moderating to 5% YoY in CY26E, before rebounding to 14% YoY in CY27E
- Small caps: After a -7.7% YoY earnings dip in CY25E, expected to roar back with 24% YoY growth in CY26E and 22% YoY in CY27E
- Mid-caps: Expected to shine with stellar earnings growth of 26% YoY in CY25E, followed by 22% YoY in CY26E and 21% YoY in CY27E
"Volatility is real, but so is the upside for those with patience and conviction," Khanna remarked regarding small caps. "Small caps have faced a near-term earnings dip this CY25, but the sharp recovery in CY26-CY27E signals high-risk, high-reward potential offering outsized upside."
Regarding mid-caps, he noted: "They strike the perfect balance, scaling businesses with proven models and strong earnings momentum, shining in periods of structural reforms and consumption booms. They combine growth with relative stability, making them a core allocation for investors seeking risk-adjusted returns."
Sector Preferences and Dark Horse Pick
When asked about sector preferences, Khanna revealed his current positioning and outlook:
- Financials: Recently increased allocation but remains underweight due to ongoing margin pressures despite addressed asset quality issues
- Bullish sectors: Defence, infrastructure, capital goods, and consumption
- Dark horse pick for CY26: Information Technology sector
"I believe that at some point, IT would start reaping the benefits of INR depreciation and acceleration in AI-application adoption," Khanna stated, identifying this as his dark horse selection for the coming year.
Khanna's comprehensive analysis provides investors with valuable insights into India's corporate earnings trajectory, budget expectations, and strategic approaches to navigating current market conditions while positioning for future growth opportunities across different market segments and sectors.
