India's cyclical recovery faces rising risks from an oil supply shock, fading domestic stimulus and weaker artificial intelligence (AI) capital expenditure, according to a Nuvama Institutional Equities report. According to the report, the impact of the oil supply shock on corporate margins is expected to emerge from Q2FY27, following a similar lag observed during the 2022 war, when small- and mid-cap companies and cyclical sectors suffered a larger hit to profits. "Inventory gains, which prevented margin contraction in Q1FY27, will reverse from Q2FY27," it said.