New Delhi [India], October 12 (ANI): Indian stock markets could face further weakness before stabilising, as rising inflation, higher interest rates and a deficient monsoon threaten consumer demand and corporate earnings, according to a report by PL Capital.

The brokerage said a sharp, V-shaped market recovery appeared unlikely in the near term, with persistent foreign investor selling and geopolitical uncertainty adding to the pressure.

"We remain cautious on markets in the near term and don't expect a V-shaped recovery. We don't rule out markets heading lower before a consolidation," the report said.

The Nifty has declined 8.2 per cent over the past six weeks and 6 per cent since the beginning of 2026, making India one of the worst-performing major markets globally, the report said.

It attributed the weakness to concerns over the impact of a 13 per cent monsoon deficit on agriculture and rural demand, higher food and crude oil prices, and rising global bond yields.

PL Capital said domestic demand had so far remained resilient, with the Reserve Bank of India raising its FY27 growth estimate to 7.1 per cent. However, it warned that inflationary pressures could weaken consumption after the festival season, particularly in discretionary categories such as apparel, automobiles, fast-moving consumer goods and housing.

The report also flagged risks to earnings estimates. PL Capital cut its Nifty earnings-per-share estimates for FY27 and FY28 by 1.3 per cent and 0.5 per cent, respectively. It expects earnings per share to grow 16.1 per cent in FY27 and 14.9 per cent in FY28.

The brokerage said more than 30 central banks had raised interest rates by 25-200 basis points, while rising US Treasury yields could limit foreign investor inflows into India in the near term.

On corporate performance, PL Capital expects companies in its coverage universe to report 16.2 per cent year-on-year sales growth and 14.7 per cent EBITDA growth in the September quarter, excluding oil and gas. However, it noted that input-cost pressures were building, with 16 of the 27 industry segments it tracks reporting a decline in EBITDA margins.

The brokerage said capital goods, healthcare, banks, metals, diversified financial services, telecom and ports remained its preferred sectors, while it maintained a cautious stance on automobiles, IT services, consumer companies and oil and gas.

The outlook for the coming quarters will depend on how inflation, monsoon-related risks and geopolitical developments affect demand and earnings, the report said. (ANI)