With earnings outlook improving, Nikunj Doshi, the Managing Partner and CIO-PMS at Bay Capital Investment Advisors believes liquidity will follow.
Hence, he expects foreign institutional investors to return strongly with larger inflows in Q1 of CY26, supported by relative macro stability and India’s consistent growth story.
Among sectors, he continues to be very positive on digital-first companies, as many of them are at the cusp of reporting hyperbolic growth in both revenues and profitability. Edited excerpts:
Do you think that with earnings largely priced in by the market, the focus will now shift to the progress of the India-US trade deal?
Market participants have always been concerned about the impact of US tariffs, and that remains an overhang. However, what’s interesting this time is that the market is also witnessing consistent upgrades in corporate earnings estimates, suggesting that the underlying momentum is improving. The future outlook now appears much brighter with domestic demand picking up, private and public capex finally taking off, and earnings revisions turning positive.
While the India–US trade deal will certainly add another layer of confidence, the near-term focus remains on sustained earnings delivery and macro stability.
What could be the possible market triggers — both positive and negative, excluding the India-US trade deal — for the remainder of FY26?
Market is hungry for growth in corporate earnings and liquidity flows. With earnings outlook improving, we believe liquidity will follow. We expect foreign institutional investors to return strongly with larger inflows in Q1 of CY26, supported by relative macro stability and India’s consistent growth story.
That said, key risks lie in global geopolitical developments, potential commodity price spikes, and any resurgence of inflation that could alter rate expectations. Overall, we remain positive on the Indian markets but alert to external uncertainties.
Do you expect the outlook for the IT sector to improve further in the December and March quarters? Are you a selective buyer in this space?
IT services sector is undergoing significant transformation/disruption with developments in AI space. We have seen several large companies retrenching middle level staff and hiring new more adaptable talents. This churn may continue for few more quarters. We therefore remain skeptical about pure IT services companies in near future.
Which sectors, in your view, deserve higher weightage in a portfolio at this stage?
We continue to be very positive on digital-first companies, as many of them are at the cusp of reporting hyperbolic growth in both revenues and profitability. With mobile and internet penetration deepening across India, combined with the rise of omni-channel business models and scalable platforms, these firms are positioned to benefit immensely from operating leverage.
We also see opportunities in consumption-oriented sectors, infrastructure, and manufacturing plays that are aligned with India’s long-term growth story. Together, these trends offer significant potential for investors seeking both growth and earnings visibility over the medium term.
Do you expect the strong momentum in the primary market to continue, with a flood of IPOs in the year ahead?
Primary market is likely to remain buoyant with the kind of response it is attracting from both institutional and retail investors. While IPOs suck liquidity from secondary markets in short term but it creates a huge scope to deploy large capital for foreign investors, who are looking at liquidity/depth in markets.
Do you still see the possibility of another 50–75 bps cut in the Fed funds rate going forward?
Most experts believe 50bps rate cut in US over next couple of quarters. However, this remains contingent on incoming data—particularly inflation trends, household consumption, and the trajectory of US employment numbers during the festive and holiday season.
If inflation moderates further while growth remains resilient, the Fed could take a measured approach toward easing policy to support stability. Conversely, any sign of demand resurgence or sticky inflation might delay rate action.
What could be the possible impact on equity, USD and gold prices if the US Federal Reserve refrains from further rate cuts?
If US Fed refrains from rate cut in next review then it would be on the back of strong economic fundamentals and in that case Equity and USD may continue to do well but Gold may see some correction. Essentially, the absence of rate cuts would reflect confidence in the economy rather than policy restraint, which markets may interpret positively.
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