Daily Voice: Don’t expect RBI rate cuts before 1H 2026; double-digit earnings growth likely next year, says Raghvendra Nath

Raghvendra Nath is the MD at Ladderup Asset Managers

"We should not expect any more rate cuts at least in the first half of 2026," said Raghvendra Nath, MD at Ladderup Asset Managers, in an interview with Moneycontrol.

With 125 bps of rate cuts, the RBI will use other tools in its arsenal to ensure the transmission of lower rates, according to him.

He is of the view that if the second-quarter GDP growth of 8.2% is an indicator, it will sooner or later translate into stronger bottom lines for Indian companies. "There is a very good likelihood that we may see double-digit earnings growth in the coming year," he said.

IT is a very important sector of the Economy contributing significantly to the GDP. In broader benchmarks too, the IT sector has significant weightage, going up to 15-16%. So diversified portfolios would generally have a good amount of IT exposure. In the last year, IT has had a negative contribution to the returns as most large IT companies have had slow growth driven largely by two factors – US tariff impact and AI advancement.

While sooner or later, we may have a trade deal with the US, the advancement in AI is only gathering acceleration, creating uncertainty for IT services businesses. However, considering most of the large IT companies have seen moderation in valuations, they may start looking attractive from a short-term perspective.

I think there are more opportunities in niche and specialist players in the technology space, like cyber security, the auto sector, data analytics, and other such niche segments.

Considering that the IT sector is significantly large, it merits looking at it into three areas – IT services, product/technology innovators that are building proprietary solutions, and new age consumer/services businesses that are harnessing technology to solve some consumer pain point. There are quite a few opportunities in each segment that can be part of Equity portfolios.

The US and China have indeed dominated the development in the field of Artificial Intelligence. While it may be difficult for Indian companies to match the scale of investment that companies in other countries are making, they may still participate in the AI revolution as service providers. Also, there are a lot of unlisted players right now in robotics and AI, who may be doing cutting-edge work.

In the short term, it actually does not matter from the broader Economic growth perspective. We continue to remain the fastest-growing large economy in the world, and this will also be true in the coming years.

That said, nothing stops Indian businesses from leveraging these global AI advancements. Just like companies worldwide use AWS, Microsoft, or Google Cloud to boost efficiency, our companies can use AI to improve efficiency. India, or any other nation, cannot remain isolated from these fast-paced developments, and we can be reasonably sure that Indian companies shall utilize AI, wherever feasible, to further their business aspirations.

India's economy is on a firm wicket right now. The GDP growth in the last few quarters has been stronger-than-expected; inflation has been low; Interest rates are moving downwards; capital investments are accelerating; and demand for goods and services remains robust.

The government continues to manage its balance sheet conservatively; the eighth pay commission is likely to spur consumption demand; a lot of foreign capital is coming into India by was of FDI which is growth accretive; a depreciated INR is favourable for exporters, etc. 2026 from that perspective shall be a year where we may see widespread positivity covering almost every sector of the economy. Unlike 2025, these developments shall also reflect positively in the Earnings of corporate India, creating positive sentiments in the Equity markets.

While the markets were generally disappointed with broadbased earnings trajectory in the last year, 2026 could be better. The broader Economic parameters are very much favourable, and the broader demand also remains robust.

If the second-quarter GDP growth of 8.2% is an indicator, sooner or later, strong Economic growth would also translate into stronger bottom lines for the Indian companies. There is a very good likelihood that we may see double digit Earnings Growth in the coming year.

I think RBI has been very clear in its intent to support growth as long as inflation remains moderate. And that is what it has successively indicated through the series of rate cuts. With 125 bps of rate cuts, RBI shall use other tools in its arsenal to ensure transmission of lower rates, and therefore, we should not expect any more rate cuts at least in the first half of 2026. The good thing this time is that inflation has been surprisingly low and remains there. If inflation behaves well, I would not be surprised if the rates are brought down further.

For many years, budgets have become non-events. However, we still look forward to the Budget to give us a sense of what the government's immediate agenda is. The government has very few levers left to influence the markets in general. However, the government spending agenda may end up providing cues for specific sectors.

US tariffs have loomed as a major market worry, not just symbolically, but because America remains India's top trading partner, and signals of an unfavourable stance are clouding future trade prospects.

A comprehensive trade deal would bring huge relief, resolving key concerns and sparking a positive market reaction across the board.