Up to 73% upside! Eternal, Tata steel, Nykaa, Coforge, among Elara's top picks ahead of Q4

Indian stock markets face subdued earnings growth amid shifting geopolitical tensions, according to Elara Capital, sharing its preview for the quarter ended on March 31, 2026. For Q4FY26, Elara expects net profit (PAT) growth of just 0.6 per cent year-on-year (YoY), reflecting cautious investor sentiment and sectoral challenges.

Excluding the energy sector, PAT growth improves to 7.3 per cent YoY, Elara notes. Inventory buffers and manageable macro-micro factors limited the adverse impact to select sectors. The recent two-week ceasefire announced on 7th April has eased market headwinds temporarily, though Brent crude movements and geopolitical risks remain key watchpoints.

Elara highlights renewed risks to earnings from higher energy and input costs, supply chain disruptions, a weaker rupee, and slowing growth. Even if the US-Iran ceasefire leads to resolution, full pre-conflict export levels may take three to six months to restore due to backlog and infrastructure damage.

In response, Elara has rebalanced its portfolio while maintaining an overweight stance on consumption and premiumisation themes, including automobiles, jewellery, quick commerce, and hotels. The firm remains constructive on banking, reduces real estate exposure, and adjusts energy sector holdings by favouring HPCL and ONGC over IOC to capture upstream earnings.

Sector upgrades include moving utilities from neutral to overweight, reflecting a power capex supercycle; pharma from underweight to neutral due to domestic market strength and currency tailwinds; and staples from underweight to neutral, with organised players gaining market share. Within diversified financials, Elara shifts exposure from Bajaj Finance and Shriram Finance to L&T Finance, citing premium valuations in the former.

Elara reports that the Nifty trades at 17.5 times one-year forward price-to-earnings (P/E), about 6 per cent below its 10-year average of 18.6 times. This level has historically served as a valuation floor, barring exceptional events. The firm expects that if rate hikes are avoided and Brent prices stabilise, earnings growth revisions for FY27E will be limited, making current levels a favourable entry point.

Energy sector PAT is forecast to decline 29 per cent YoY in Q4FY26E due to rising Brent prices and margin pressures, such as a diesel gross margin loss of Rs 14 per litre compared to a profit of Rs 4 per litre in Q3FY26. Outside energy, Elara expects sales, Ebitda and PAT growth of 12 per cent, 10 per cent, and 7 per cent respectively in Q4, despite margin contractions across healthcare, industrials, materials, utilities, and banks.

Key sectors show mixed trends: autos benefit from volume growth with 23 per cent PAT rise, banks see credit growth at 13.8 per cent but modest 6 per cent PAT increase, and IT services are forecast to grow dollar revenue by 0.4 per cent quarter-on-quarter. Metals and consumer discretionary sectors are also expected to report strong PAT growth.

Hotels and chemicals remain impacted by Middle East tensions, affecting occupancy and raw material availability. Elara notes that the Nifty’s FY27E EPS growth forecast of 16 per cent does not yet factor in downside margin risks, with more clarity expected in coming months.

Elara sees Eternal (Target Price: Rs 415), Titan (Target Price: Rs 5,000), JSW Steel (Target Price: Rs 1,089), Tata Steel (Target Price: Rs 215), Mahindra & Mahindra (Target Price: Rs 4,747), Solar Industries (Target Price: Rs 15,450), ONGC (Target Price: Rs 320), Tata Consumer (Target Price: Rs 1,260), Adani Ports (Target Price: Rs 1,883), Samvardhana Motherson (Target Price: Rs 107), Godrej Consumer (Target Price: Rs 1,310) as leaders from the largecap space.

From the midcap, it has pickers Prestige Estates (Target Price: Rs 2,300), Nykaa (Target Price: Rs 270), Oberoi Realty (Target Price: Rs 2,500), Supreme Industries (Target Price: Rs 3,980), Radico Khaitan (Target Price: Rs 3,500), Jindal Stainless (Target Price: Rs 867), SAIL (Target Price: Rs 158), Coforge (Target Price: Rs 1,260), Vishal Mega Mart (Target Price: Rs 192), Kaynes Tech (Target Price: Rs 5,700) as leaders.

MRPL (Target Price: Rs 163), Chennai Petrochem (Target Price: Rs 977), PSP Projects (Target Price: Rs 884), Equitas Small Finance Bank (Target Price: Rs 83), RBL Bank (Target Price: Rs 345), Ramco Cement (Target Price: Rs 1,146), Ujjivan Small Finance Bank (Target Price: Rs 72), Somany Ceramics (Target Price: Rs 737), Bajaj Consumer (Target Price: Rs 400) and Minda Corp (Target Price: Rs 775) as its leaders from the smallcap space.