Daily Voice: Nimesh Chandan bullish on earnings growth acceleration next year; double-digit profit growth seen in H2FY26

Nimesh Chandan is the Chief Investment Officer at Bajaj Finserv Asset Management

Earnings growth is set to accelerate as we move into 2026, said Nimesh Chandan, Chief Investment Officer at Bajaj Finserv Asset Management. He expects corporate profit growth to move closer to double-digit in the second half of FY26 and further accelerate into the mid-teens in FY27.

According to him, the Fed’s December move likely marks the end of its rapid easing phase. January looks more like a pause than a pivot as markets are pricing less than a one-in-four chance of another cut, he said in an interview to Moneycontrol.

Among sectors, he is constructive on non-ferrous metals as a basket and believes they should do well over the next year.

Do you believe US Federal Reserve will make the final benchmark interest rate cut of its current easing cycle in January 2026, followed by a possibility—but not a confirmation—of another rate cut later in the year?

The Fed’s December move likely marks the end of its rapid easing phase. January looks more like a pause than a pivot as markets are pricing less than a one-in-four chance of another cut. The committee’s own projections point to just one reduction in 2026, and that’s conditional on inflation staying benign and growth softening further.

Our base case is a hold in January, with scope for a cut in March if data cooperates. Beyond that, the Fed will tread carefully; policy credibility matters more than speed. Investors should prepare for a slower, data-dependent path rather than a straight line to lower rates.

Are you confident that earnings growth is set to accelerate next year?

Yes, we remain confident that earnings growth is set to accelerate as we move into 2026. We expect corporate profit growth to move closer to double-digit in the second half of FY26 and further accelerate into the mid-teens in FY27.

This improvement is being underpinned by a gradual pickup in economic activity, which should translate into healthier revenue growth for Nifty 500 companies. At the same time, a relatively benign and soft commodity cost environment is likely to support margin expansion. The combination of improving top-line growth and stable-to-improving margins should result in strong earnings growth, which, in turn, should provide support to market returns over the next year.

With consistent Fed funds rate cuts, expectations of strong earnings visibility, and the possibility of an India–US trade deal sooner rather than later, do you expect FII outflows to stop soon and 2026 to witness net inflows?

FII flows are influenced by multiple and often shifting factors. When we look at India’s positioning relative to other emerging markets, India continues to stand out as a clear bright spot.

The combination of relatively stronger economic growth, macro stability and political certainty, with a stable government at the helm, places India in a favourable position to attract capital flows that are directed towards emerging markets. These structural positives provide a strong foundation for investor confidence.

In addition, once the resolution of trade-related uncertainties plays out, they should help restore India’s competitiveness in export markets and bring greater stability to the currency. Taken together, these factors are likely to reinforce foreign investor confidence and improve the environment for capital inflows over the period ahead.

Do you see the market recording a rally of more than 10 percent even in 2026?

If you look at the track record, the Nifty has delivered positive returns in every calendar year for the last 10 years, which is quite rare and something very few equity markets globally have managed to achieve. That consistency itself speaks to the underlying strength of the Indian market.

As we move into 2026, with earnings growth expected to pick up, we believe the Nifty is well placed to continue delivering positive returns. Importantly, it is not just the headline index. Broader market performance over the last year or so has lagged the Nifty, and we expect a recovery there as well.

As earnings growth improves, uncertainties around trade-related issues reduce, and some of the geopolitical tensions ease, the overall environment should turn more supportive for equities.

Do you think the commercial vehicle segment within the auto space will make a strong comeback next year?

The commercial vehicle segment has not gone through a typical sharp downturn over the last few years. A recovery is clearly underway, and we believe the segment is already in the process of picking up momentum. Over the last few months, we have started to see early green shoots of recovery, both in key lead indicators and in commercial vehicle sales data.

Typically, commercial vehicles tend to act as an early indicator of an economic pickup. Since we expect the broader economy to improve, the commercial vehicle segment should benefit from that trend as well. While the upturn may be relatively shallow, we do expect a recovery to continue, with the last quarter of the current fiscal also shaping up to be supportive for the segment.

Do you see the rupee bottoming out soon?

Foreign portfolio outflows, a slow year for FDI coupled with tariff worries put some pressure on the Rupee. India’s fundamentals, meanwhile, stayed solid, growth held up, inflation was at all-time lows and the current account avoided stress.

It’s possible that next year we may see recovery. We expect a softer dollar, steadier trade post the trade deal, and a return of risk appetite in global portfolio flows. FDI prospects also look good for 2026. With imports slowing and the trade balance improving, the rupee has a stronger foundation for recovery.

Do you expect export-oriented companies to see strong earnings uplift due to rupee depreciation?

Yes, we do believe that export-oriented sectors such as Pharmaceuticals and IT could see an earnings uplift from the Rupee depreciation. Currency movement can provide a near-term tailwind and may result in a near term benefit for these sectors.

However, over the longer term, earnings performance will continue to be driven by the underlying fundamentals of the businesses rather than currency alone. Within this context, we remain constructive on the Pharma sector, where fundamentals are supportive, and we are overweight there. In contrast, the outlook for the IT sector is likely to remain more volatile, driven by policy actions in the US and the growth trajectory of the US and European economies.

Do you see strong opportunities in non-ferrous metals in 2026?

We have been bullish on metals throughout last year. Historically, every rate-cut cycle tends to be accompanied by an uptick in the commodity cycle, as lower rates and expectations around growth provide support to commodity prices. In that context, the recent set of rate cuts by the US Federal Reserve have already started to boost commodity prices, including non-ferrous metals.

A sustained upcycle in non-ferrous metals will continue to depend on the pace of economic activity in developed markets as well as in China. These two regions remain critical drivers for demand. We are therefore closely monitoring how these macro variables evolve.

Overall, we are constructive on non-ferrous metals as a basket and believe they should do well over the next year. However, the extent and durability of the upside will be influenced by how global economic conditions play out.