Daily Voice: BFSI to lead earnings growth next year as credit uptick likely to drive upgrades, says Poonam Tandon

Poonam Tandon is the Chief Investment Officer at IndiaFirst Life

Poonam Tandon, the Chief Investment Officer at IndiaFirst Life, feels the earnings growth should at least get back to low to mid-teens levels, if not a high-teens growth story next year.

So sectors such as BFSI should lead as an uptick in credit growth is likely to drive earnings upgrades, she said in an interview with Moneycontrol.

According to her, globally, the commodity cycle seems to be on an upswing, helped by a weaker dollar and emerging supply deficits, especially in commodities such as copper. Inward-looking policies of many countries should lead to rising industrialisation and spur commodities demand, she said.

Do you see a lot of opportunities in the midcap and small-cap space, which has underperformed the equity benchmarks in the recent past?

Equity markets have witnessed a reasonable correction since October 2024 up to March-April 2025. It has been over 14 months now that markets have been range-bound, as they have not yet crossed the highs of last year. Select pockets of broader markets have indeed become attractive.

There are signs of earnings revival, helped by improving rural growth prospects, on the back of good monsoons, good festive season, the benefits of tax rebates, and the recent GST rate rationalisation alongside aggressive RBI monetary easing and liquidity infusion.

Which three themes are on your radar for your 2026 portfolio?

We prefer sectors such as BFSI (NBFCs, PSU banks, MFIs), select consumption names (discretionary), and commodities. Benefits of tax rebates and the recent GST rate rationalisation provided by the government and the aggressive RBI monetary easing and liquidity infusion should revive consumer demand and credit offtake. This should help the BFSI and consumption names.

Globally, the commodity cycle seems to be on an upswing, helped by a weaker dollar and emerging supply deficits, especially in commodities such as copper. Inward-looking policies of many countries should lead to rising industrialisation and spur commodities demand.

Do you think 2026 will be a year of earnings upgrades after several quarters of downgrades?

Nominal GDP growth has been impacted by deflator issues, which have contributed to the earnings slowdown. As things reverse, nominal GDP growth should revert to double-digit growth, which in turn should help earnings growth. This, alongside improvement in demand, should result in earnings upgrades in the upcoming year.

Do you expect 15–16 percent earnings growth next year across a broad set of sectors?

We feel that earnings growth should at least get back to low to mid-teens levels, if not a high-teens growth story. This is on the back of measures highlighted earlier. Yes, so sectors such as BFSI should lead as an uptick in credit growth is likely to drive earnings upgrades.

Do you expect stronger GDP growth next year?

As consumption revives on the back of government and RBI-led measures, private capital spending should also get a leg-up. This should lead to a stronger GDP growth trajectory.

Do you think the current challenge in the equity market stems from relentless supply?

Equity markets have delivered excellent returns since the outbreak of COVID-19 due to strong earnings performance. Even now, Nifty’s 5-year CAGR returns performance (as on November month-end) remains strong at about ~15% CAGR.

Last year, around this time, valuations had become expensive both in absolute terms and relatively as compared to other peer markets. Earnings growth also started slowing down due to transient issues. India was also under-indexed to the AI-driven rally in many global markets. Thus, FPI flows got redirected towards other EMs, which had higher exposure to the AI theme and were relatively cheap.

Do you believe the legal case against US tariffs holds significant merit?

Trump invoked special powers (under the International Emergency Economic Powers Act, or IEEPA) to impose the tariffs on nearly every US trading partner. As per our understanding, the law lets the US president regulate commerce in a national emergency. Without getting into the case specifics, since it is an ongoing one, one thing is clear that the US policy approach probably won’t change much. This is based on recent comments by officials of the Trump administration, for e.g., Treasury Secretary Scott Bessent, who said that they would switch to “other legal authorities” to ensure high tariffs remain in place.

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