According to Anil Rego of Right Horizons PMS, earnings growth expectations for FY26 have improved, projecting a 12 percent earnings growth, supported by a stable macro backdrop, easing input costs, and potential policy tailwinds.
Corporate profit-to-GDP ratio remains at a 17-year high of 4.7 percent, indicating structural earnings strength, he said in an interview to Moneycontrol. However, earnings upgrades may be selective, hinging on sustained domestic demand recovery and improving rural consumption, he believes.
The two-wheeler space presents a constructive opportunity, supported by a combination of fiscal tailwinds, rural recovery, and improved affordability, said the Founder and Fund Manager at Right Horizons PMS.
Do you see significant developments in trade deals as the July 9 deadline approaches, or do you expect Trump to extend the deadline until Labour Day in September?
While July 9 was initially positioned as a decisive deadline for new US trade deals, recent developments suggest that a full slate of agreements is unlikely by that date. Treasury Secretary Scott Bessent has indicated that while negotiations with key countries are progressing, many deals may not be finalized in time. Instead, the administration appears to be prioritizing partial or headline agreements with select nations such as India, Taiwan, and the EU while allowing others to continue talks under the threat of reverting to higher April 2 tariffs.
Given the complexity of unresolved issues in agreements with the UK and China, and Trump’s emphasis on political optics over structural reform, the July 9 deadline now seems more tactical than final. An extension is becoming increasingly likely, buy time for negotiations. Therefore, while a few symbolic deals may emerge, a broader resolution is expected later given the complexity of bilateral trade talks and the lack of substantive groundwork with key partners.
Do you think the market rally seen over the past couple of weeks is driven more by hopes of an earnings recovery than by easing tensions in the Middle East?
While easing geopolitical tensions particularly the US-brokered ceasefire in the Middle East have improved overall risk sentiment, the recent market rally appears to be primarily driven by expectations of an earnings recovery. Investors are positioning ahead of the results season, anticipating strong corporate performance backed by improving consumption trends, easing input costs, and robust credit growth. Sectoral gains in financials, consumer durables, and industrials point to optimism around domestic demand revival and margin normalization.
Although geopolitical de-escalation and falling crude prices have contributed to short-term relief, these are seen more as supportive catalysts rather than the core drivers. The broader participation across midcaps, small caps, and IPOs indicates that investors are responding to improving fundamentals and forward earnings visibility, rather than just reacting to external risk events.
Do you anticipate significant earnings upgrades in the Q1FY26 earnings season starting in July?
In Q4FY25, India Inc. delivered a modest improvement in profitability, with BSE500 (ex-OMCs) PAT rising 10 percent YoY, aided largely by cost rationalisation and a favourable base. However, revenue growth remained weak, marking the eighth consecutive quarter of sub-10 percent top-line growth. Margin gains were limited, with sectors like metals, chemicals, telecom, and cement showing strength, while financials, industrials, and consumption segments saw moderated growth.
Looking ahead, expectations for FY26 have improved, projecting a ~12 percent earnings growth, supported by a stable macro backdrop, easing input costs, and potential policy tailwinds. Corporate profit-to-GDP ratio remains at a 17-year high of 4.7 percent, indicating structural earnings strength. However, earnings upgrades may be selective, hinging on sustained domestic demand recovery and improving rural consumption.
Are you betting on the two-wheeler space, given the tax benefits for the middle class and improving rural sentiment?
The two-wheeler space presents a constructive opportunity, supported by a combination of fiscal tailwinds, rural recovery, and improved affordability. The Union Budget’s proposal to raise the income tax exemption limit to Rs 12 lakh is expected to benefit around 3.5 crore taxpayers, unlocking nearly Rs 1 lakh crore in spending power. This provides a direct boost to entry-level and commuter two-wheelers, which have a high correlation with middle-class urban and rural consumption.
Simultaneously, improving rural sentiment, driven by MSP hikes, an anticipated normal monsoon, and easing inflation, is reviving demand in price-sensitive segments. Early signs of this trend were visible in the May 2025 sales data, where two-wheelers showed sequential recovery growing in mid-single digits YoY.
Volumes in 2-wheeler is expected to grow at nearly 13 percent CAGR FY27, reflecting the sector’s rebound potential from a low base. While challenges like EV transition and competitive pricing remain, the policy environment and macro signals support a positive medium-term view on the two-wheeler segment.
Are you bullish on the aviation and hotel sectors?
We have a neutral view for the hotel sector, and following a nuanced approach in aviation. Air travel, being a discretionary expense, typically tracks a country’s economic growth. However, India’s aviation sector has grown at a much faster pace, driven by both economic and policy-related factors.
While global air travel usually expands at about 2.1 times GDP growth, India has consistently outperformed with a median of 2.8 times. This outperformance has been supported by key initiatives such as expanding the number of operational airports from 74 in 2014 to 162, the launch of around 619 routes under the RCS-UDAN, and a notable 25 percent reduction in real airfares between 2011 and 2023. These combined efforts have enabled India’s air passenger market to grow at a compound annual rate of 9 percent from 2006 to 2025.
In aviation, while the broader industry continues to benefit from rising passenger demand, expanding international routes, and benign fuel prices, we remain selective. Players with stronger operational metrics, cost efficiencies, and strategic international expansion are better positioned to sustain growth and profitability, especially amid capacity constraints and evolving regulatory dynamics.
In the hotel sector, robust demand across business, leisure, and MICE segments has driven strong occupancy and rate growth. The sector is benefiting from structural tailwinds such as increased domestic travel, higher disposable incomes, and rising event activity. However, with fresh capacity additions underway and valuations factoring in near-peak performance, a measured stance is prudent.
Do you expect a significant improvement in consumption in India going forward?
A gradual improvement in consumption in India is expected going forward, though a broad-based surge may take time. Several supportive factors such as rural demand is showing early signs of revival on the back of MSP hikes, an anticipated normal monsoon, and enhanced liquidity through government schemes.
Additionally, the Union Budget’s proposed income tax relief, aimed at the middle class, could increase disposable income and spur urban discretionary spending in the coming quarters. Discretionary segments such as premium personal care and electronics are likely to recover gradually in compared to staples or value-oriented offerings. Overall, while the consumption cycle is poised to strengthen, the recovery is likely to be gradual with momentum expected in the second half of FY26, particularly around the festive season.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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