Daily Voice: Earnings forecasts seen stabilising by H1FY26, barring major macro shocks, says Wallfort PMS CIO

Considering the rising fears of recession, do you foresee more sell-offs in US markets?

Recently, the Nasdaq Composite has seen significant declines. The top seven tech companies - Tesla, Nvidia, Alphabet, Meta, Amazon, Apple and Microsoft have collectively lost over $1.5 trillion in market value since the start of 2025. The decline is largely due to market reaction to President Donald Trump's proposed tariffs on major trading partners, including Canada, Mexico and China, causing volatility in the technology sector. Inflation has moderated, however, it is still above the Fed’s 2% target, limiting the scope for immediate rate cuts.

The likelihood of further sell-offs in US markets depends on evolving macroeconomic data and Federal Reserve policy. If economic data weakens further or corporate earnings disappoint, US markets may see further sell-off.

If yes, will this impact Indian equity markets and bring them down to the lows seen after the Lok Sabha election results?

For Indian equity markets, a US downturn could trigger short-term volatility, primarily through foreign institutional investor (FII) outflows. In 2025, FIIs have withdrawn over $16 billion from Indian equities, reflecting caution amidst global uncertainties. At the same time, the Indian rupee has weakened against the US dollar, recently. However, as long as India’s core fundamentals remain strong, the impact of global uncertainties on domestic markets is likely to be contained. Watch out for corporate earnings, resilient consumption demand and government capital expenditure.

What are the other major threats to Indian equity markets?

Apart from global recession risks and FII outflows, the ongoing tariff tensions with the US could disrupt exports, affecting sectors like IT, Pharmaceuticals, etc. Additionally, a slower-than-expected recovery in consumer spending may weigh on demand-driven industries. Global uncertainties, including monetary policy actions by major central banks and geopolitical developments, could also impact market sentiment. While the broader economic outlook remains positive, these factors could drive near-term volatility.

Do you think the earnings estimates will bottom out by the end of 1HFY26?

Earnings estimates are likely to stabilise by the end of 1HFY26, provided there are no major macroeconomic disruptions. While some sectors, particularly export-oriented ones, may face near-term challenges due to global uncertainty, domestic demand remains a strong anchor. A revival in consumer spending, continued government capex and easing interest rates could support earnings recovery. However, sector-specific factors, such as policy changes or global trade dynamics, will play a crucial role in determining the pace of stabilisation.

Which sectors should be bought now?

Given the current market landscape, sectors like healthcare, manufacturing, and infrastructure present attractive opportunities. Healthcare remains an attractive sector, given India’s underpenetrated market and aggressive capex by leading hospital chains to expand capacity. Manufacturing is supported by government initiatives like the PLI scheme, a focus on self-reliance, and strong order inflows. Infrastructure remains a key growth driver, backed by sustained government capex and private sector participation.

These sectors are well-positioned to deliver structural growth, making them compelling investment opportunities.

Do you see the possibility of a 75 bps cut in the repo rate by the RBI in the rest of 2025?

The 75-bps repo rate cut in 2025 seems less likely given the RBI’s cautious stance. A more realistic scenario would be a 50 bps reduction, provided inflation remains under control. If inflation remains within the RBI’s comfort range and global central banks move toward easing, a gradual rate reduction could be on the table. The central bank is likely to take a measured approach, ensuring that liquidity support does not fuel inflationary pressures.

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