Jyoti Prakash, the Managing Partner - Equity & PMS at AlphaaMoney believes that demand for consumer goods will see an uptick in the second half of FY26. "We are encouraged by the initial commentary from consumer companies," he said in an interview to Moneycontrol.
In the IT space, according to him, companies whose revenues majorly come from such industries (auto for example) are likely to suffer. However, he remains positive on those Indian IT companies which mainly cater to the BFSI sector in the US as they stand to benefit from deregulation.
Markets are slaves to earnings. Around 60% of the companies reported better-than-expected results for the March quarter. "If we can repeat that for the June quarter, equity markets will take notice," Jyoti Prakash said.
Do you strongly believe there will be a healthy revival in consumption in the second half of FY26, driven by festive demand, especially following rate cuts and tax reductions?
Yes. We are in the camp which believes that demand for consumer goods will see an uptick in the 2nd half of FY26. By consumption we mean both staples and discretionary. Demand from rural India will be strengthened given better-than-expected monsoons. Demand conditions in urban India remain tepid and should see revival considering more money in the hands of the people.
Government spending on infrastructure etc has risen on a YoY basis which would have a second order effect on consumer demand. Consumer inflation has been cooperating, meaning thereby more disposable income for households. We are encouraged by the initial commentary from consumer companies.
Do you expect Indian equities to outperform global peers in FY26, supported by a potential rally in the second half—provided no major global risk factors emerge?
Never say never in markets. Indian equities have underperformed in calendar year 2025 YTD. But, when we look at stock market returns over the last 6 years, India is among 7 nations where equity returns are in excess of 100%.
What is important to note is that India is probably the only major economy that is on target to lower the fiscal deficit for FY26. Most advanced economies are stimulating their economies with higher fiscal deficits. That explains the outperformance of European markets.
Markets are slaves to earnings. 60% of the companies reported better-than-expected results for the March quarter. If we can repeat that for the June quarter, markets will take notice.
Lastly, flows. In-flow into mutual funds domestically has been good but supply of equities has been overwhelming. We are seeing subscriptions to IPOs, QIPs, promoter selling etc. which in turn reduces money available for secondary market purchases. Purchases by FPIs have been subdued. Inbound flows from FPIs will support markets considering that they have been most underweight on Indian equities for years.
Do you agree that IT earnings are currently at significant risk? Would you consider taking exposure to the IT sector only in the second half of the year or beyond?
Earlier, Indian companies did well when S&P 500 earnings (as a % of the US GDP) were strong. It appears this is no longer true. Weakness in the USD is another concern. It is increasingly seeming to be the case that the US administration is in favour of a weak dollar to revive manufacturing in the US.
Also, high tariffs are hurting a few industries (autos for example) and therefore IT companies whose revenues majorly come from such industries are likely to suffer. Having said that, we remain positive on those Indian IT companies which mainly cater to the BFSI sector in the US as they stand to benefit from deregulation.
Are you hopeful that Q1 FY26 earnings and management commentaries will provide the necessary triggers to gauge full-year earnings expectations?
Definitely. Corporations have their ears close to the ground. Equities are all about numbers and narratives. Except for companies which are likely to be impacted by tariffs, markets will be keen to hear about the demand outlook for the rest of the companies. Post March quarter results, analysts upgraded numbers for FY25 but cut estimates for FY26 by 5-6%. Can we see a reversal of that post June quarter results? We remain optimistic.
Which sectors are currently on your bullish bias list?
We are bottoms-up stock pickers. Pick your sector, there are winners and losers. Think of companies in the Financial Services or Telecom or Health Care - there will be laggards and leaders.
Do you think the US could emerge as a major beneficiary of trade tariffs in the medium to long term?
The US will benefit from higher tariffs. Revenue earned from tariffs will offset revenue lost from lower taxation (both corporate and income tax). Lower taxation means more resources left for investments / consumption. Most economists are worried about higher core inflation if tariffs are passed on to the consumer in terms of higher prices.
Yes, the goods inflation will rise but there will be offsetting impact from lower services / shelter inflation. Overall, in the medium to long term, global businesses may be better off by investing in the US rather than exporting to the US.
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