Daily Voice: Mahindra Manulife's Krishna Sanghavi sees 12-13% earnings growth in FY26 driven by these 3 sectors

In markets, it is always a challenge to emphatically say whether the worst is behind us or not. The environment continues to be dynamic, with elevated global uncertainties - particularly around trade policies. Recent tariff actions by the US have the potential to disrupt macroeconomic dynamics and affect earnings visibility across sectors.

Such global developments can impact investor sentiment, which in turn influences market multiples. So rather than making broad market-level predictions, it may be more prudent to focus on bottom-up stock picking—especially in sectors where fundamentals remain robust.

Assuming a stable external environment and continued domestic resilience, we believe a 12-13% earnings growth assumption for FY26 is reasonable. If this plays out without any major external shocks, benchmark indices could potentially deliver similar returns over the next fiscal. More clarity on global trade direction—possibly emerging in April—will help assess this better.

Are you worried about the US economy under the second term of Donald Trump?

Potential policy shifts under a second Trump administration like the implementation of tariffs, the push for reshoring through DOGE (Department of Government Efficiency), and efforts to curb fiscal deficit could influence US growth dynamics. While some of these actions might be aimed at structural efficiencies for the longer term, they run the risk of creating short-term disruptions, especially for global trade and supply chains.

For India, the impact will vary by sector. Export-oriented industries or those with global supply linkages may face earnings headwinds. However, India’s relatively insulated consumption-led economy provides some cushion.

Do you think FMCG stocks will continue to underperform?

FMCG has underperformed recently due to muted demand and high input costs. However, we believe the space could gradually turn more constructive. Government spending ahead of elections, coupled with continued welfare schemes and improving rural income, could drive consumption recovery.

Volume growth is expected to pick up as affordability improves in semi-urban and rural regions. Over the medium term, this could support earnings upgrades in select FMCG names. While the overall pace of recovery may be gradual, the worst in terms of underperformance could be behind us.

Do you think the real estate sector is at risk due to a slowdown in some cities?

Real estate in India is a city-specific story. Some markets may see short-term slowdowns due to higher inventory or localized economic issues. Additionally, fluctuations in equity markets could influence investor sentiment, potentially leading to cautious spending in the premium housing segment.

That said, structural demand for housing remains intact—particularly in the mid-income and affordable segments. Developers with a strong balance sheet and credible delivery track record continue to see good traction. We do not expect a broad-based slowdown across the real estate sector.

Do you see a strong earnings revival in FY26 after looking at the performance in FY25?

Yes, we believe FY26 could deliver stronger earnings growth compared to FY25. While FY25 has been a year of transition marked by currency volatility, inflationary concerns, and policy-related impact we expect FY26 to benefit from a more stable domestic environment.

Earnings tailwinds could come from sectors linked to domestic capex, consumption recovery, and select financials. However, one must be watchful of how global developments particularly US tariff actions play out. Their full impact on corporate earnings remains uncertain and may vary across sectors.

Do you foresee a strong pick-up in capex in the coming financial year, following lower-than-forecast spending in FY25?

Yes, FY26 could witness a notable rise in capex both public and private. The government may accelerate spending, particularly on infrastructure and rural development. At the same time, many corporates, having strengthened their balance sheets over the past few years, may also look to do capex for their growth plans.

We believe the investment cycle is at an inflection point, which could provide a support base for GDP growth and earnings momentum. While execution remains key, corporate commentary and announcements clearly show the intent and groundwork for a capex revival.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.