Daily Voice: This CIO anticipates positive trajectory for earnings growth in FY26 driven by increased consumer demand, technological adoption, infrastructure development

While the recent US-China trade agreement has alleviated some immediate concerns, it's premature to conclude that major risks to global growth have been entirely eliminated. The underlying structural issues between the two economies persist, and the potential for future disagreements remains. Moreover, other global challenges, such as supply chain disruptions and monetary policy shifts, continue to pose threats. Therefore, while the deal is a positive development, we remain cautious and vigilant in our global growth assessments.

Do you think India can attract significant emerging market flows with the easing of several risk factors?

India stands poised to benefit from increased emerging market flows, especially as certain global risk factors abate. The country's robust domestic consumption, digital infrastructure advancements, and pro-reform government policies make it an attractive destination for investors. Furthermore, as global investors seek diversification, India's relative macroeconomic stability and growth prospects enhance its appeal. However, sustained inflows will depend on continued structural reforms and maintaining fiscal discipline.

What are the challenges that could dampen market sentiment for the remainder of the calendar year?

Several factors could temper market enthusiasm in the coming months. Potential challenges include unexpected inflationary pressures, delays in policy implementations, and global economic slowdowns. Additionally, any resurgence of geopolitical tensions or unforeseen global events could introduce volatility. Domestically, corporate earnings not meeting expectations and liquidity constraints could also impact investor sentiment. We continuously monitor these variables to adjust our strategies accordingly.

Have you made any recent changes to your strategy or portfolio positioning in response to the volatility arising from external factors such as geopolitical tensions or global macroeconomic uncertainties?

Our investment approach emphasizes companies with a strong domestic focus, as they are generally less susceptible to external disruptions such as global trade disputes or international market volatility. By concentrating on businesses that derive the majority of their revenue from within India, we achieve greater predictability in performance and reduce exposure to global uncertainties. This strategy not only mitigates risk but also positions the portfolio to capitalize on India's robust economic fundamentals and growth trajectory.

Do you expect strong earnings growth in FY26?

We anticipate a positive trajectory for earnings growth in FY26, driven by factors such as increased consumer demand, technological adoption, and infrastructure development. Sectors like manufacturing, renewable energy, and digital services are expected to lead this growth. However, it's essential to remain cognizant of potential headwinds, including global economic fluctuations and domestic policy changes, which could influence earnings outcomes.

Do you believe the market will reach new highs and deliver strong double-digit returns this year, considering the easing of most risk factors?

The alleviation of certain risk factors creates a favourable climate for market growth; however, there are intrinsic uncertainties in forecasting specific market peaks or return percentages. The performance of the market will depend on a range of factors, such as corporate profits, worldwide economic circumstances, and the outlook of investors. Although there is potential for strong returns—particularly in sectors that correspond with structural growth themes—we recommend a balanced and diversified investment strategy to manage potential fluctuations.

What are your expectations from the RBI's monetary policy scheduled for June? Do you foresee any changes in the growth and inflation forecasts for the full year?

We anticipate that the Reserve Bank of India (RBI) will maintain a cautious stance in its upcoming June policy meeting. Given the current economic indicators, there's potential for the RBI to adjust its inflation and growth forecasts to reflect evolving realities. If inflation remains within targeted levels and growth projections are optimistic, the RBI might consider policy measures such as rate cuts to support sustained economic expansion. However, any decisions will likely be data-driven, emphasizing the central bank's commitment to macroeconomic stability.

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