Daily Voice: India Inc's continued earnings growth to be big market catalyst going forward, says Helios India's Dinshaw Irani

Dinshaw Irani is the MD & CEO at Helios India

• Continued earnings growth of India Inc to be the big market catalyst going forward
• Q3 earnings print looks no different from Q2
• Don't expect RBI to undertake any rate cuts in next couple of meetings

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Dinshaw Irani, MD & CEO at Helios India, believes the equity market has already discounted the India–US trade deal. He said in an interview with Moneycontrol that the next big catalyst for the market will be the continued growth in earnings of India Inc.

He added that earnings growth is still in its nascent stage, and foreign institutional investors (FIIs) may wait a bit longer to see whether it is sustained before taking an active call on India.

According to him, the Q3 earnings print looks no different from Q2. In Q2, earnings for the NSE 500 grew at a mid-teens pace.

Do you see subdued sentiment in the IT sector persisting if the sector does not align quickly with the AI theme?

More than alignment, a painful reset will be required by the IT services sector before it achieves normalization. The revenue model for IT service players has been manhours X rate per hour.

With gen AI becoming more adaptive, the men and the hours needed by them to complete a task are bound to reduce. The hike in rate per hour will not be able to accommodate this reduction and hence the reset.

Do you think the market may consolidate around current levels?

The fine print of the trade deal will indeed help in calming frayed nerves but may not be a catalyst for the market unless it varies a lot vis-a-vis what has been announced till date. The market has already discounted the deal. The big catalyst for the market will be the continued growth in earnings of India Inc.

After reviewing the Q3 earnings, are you confident that a meaningful earnings recovery is underway?

The Q3 earnings print is looking no different from the Q2 earnings. In Q2, the earnings for NSE500 grew at a mid-teens pace. The growth was led by the small cap universe which grew earnings at 35+% while the mid and large caps grew earnings at 25+% and 10%. This quarter too, the trend thus far seems to be repeating albeit at a faster pace for the small cap universe.

Do you believe that the US trade deal alone is insufficient to bring FIIs back to India, and that strong earnings growth along with macroeconomic stability are also required?

The US trade deal is indeed a very big positive as it gave a boost to the INR. Local currency stability is one of the parameters tracked by the FIIs. The other parameters being the premium commanded by the market vis a vis other EMs, valuations and the underlying growth. On the former two, India is now trading at 10-15 year average valuations and premiums. The earnings growth, however, is in its nascent stage and the FII may wait a bit more to see it sustains before taking an active call on India.

Do you think the EU deal will have a limited impact on India, considering that the EU has signed FTAs with several countries that compete with India?

It will be a while before the EU deal has any meaningful impact on India's trade. The trade deal signed with EU has to be rectified by each of the parliaments of the 27 countries constituting the EU. Thus it will be a while before one can get constructive on the EU deal.

What is your view on the RBI policy meeting outcome?

We don't expect the RBI to undertake any rate cuts in the next couple of meetings as even the previous rate cuts have not resulted in the G-Sec yields coming down. Given the centre and state plans of borrowing in the coming year, the yields are expected to remain at elevated levels. Thus it will be futile for RBI to cut rates.