Daily Voice: Q1 EBITDA, PAT growth so far in line with expectations, but EPS estimates may see downgrades, says this CIO

Markets have recovered from the lows hit in March-April 2025 on receding growth risks. Valuations have also risen and are currently trading above mean levels. Global macro-outlook remains uncertain as market participants grapple with tariff policy uncertainty and geopolitical tensions. Any escalations on these fronts could dent sentiments.

But India’s domestic macro fundamentals remain sound, backed by proactive monetary and fiscal actions. The RBI Monetary policy has been pro-growth (lowering of interest rates and increasing liquidity in the system), and the budget has provided tax cuts for the service class, which is expected to spur growth.

Has the earnings season left the equity market fatigued? Based on management commentaries during the June quarter earnings, do you have a strong sense of how the September quarter might shape up?

RBI has taken steps to provide liquidity to the system and ease policy rates significantly. The government had also provided tax rebates in the latest Budget. Going ahead, we expect the full impact of these measures to come into effect as we move through the next six months.

Urban consumption should gradually recover, with rural consumption improving further (on account of timely monsoons and a robust kharif sowing season). Thus, earnings could witness a revival from the September quarter onwards.

Have you been either surprised or disappointed by the performance of any particular sectors in the ongoing corporate earnings season?

Among the companies that have declared results so far, EBITDA/ PAT growth has largely met expectations. Cement and some NBFCs have come out ahead of expectations so far. On the other hand, some consumption-oriented names have come out with numbers below expectations.

Earnings expectations for Q1 have been muted. However, Nifty 50 EPS growth expectations for the full year stand in the mid-teens. Therefore, there could be some downward revisions in EPS estimates.

Are you increasing exposure to the auto sector, given expectations of a healthy second half in FY26?

The auto sector has been impacted by continuing weakness in the overall demand environment. This could impact domestic volumes, especially in the passenger vehicle (PV) segment. However, some pockets are relatively better placed, such as 2W and the tractor segments, which are expected to do better. We are selective in our approach in this sector.

What are your expectations for Fed Chair Jerome Powell at the upcoming FOMC meeting next week?

The US Federal Reserve, till now, has been data-dependent, considering the uncertain impact of the tariff and geopolitical uncertainty. Apart from the fact that President Trump has adopted an aggressive stance vis-à-vis the US Fed urging to ease policy rates. As per the dot plot, the US Fed is expected to reduce policy rates twice this year. We feel the US Fed could continue to adopt a ‘wait and watch’ approach based on emerging data for this Fed meeting.

Given the concerns around earnings growth, is it advisable to stay away from large FMCG names for now?

The FMCG sector has indeed been impacted by the slowdown in consumption, which has decelerated earnings growth. Stock prices have also reacted accordingly. Although valuations in some names remain high, we need to be selective, as some of the concerns may be priced in.

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