The next earnings upgrade candidates could come from consumption, says Tata MF’s Rahul Singh

The veteran fund manager, who has also been a telecom analyst earlier, drew parallels between telecom and healthcare, saying both sectors offer steady 12–15% growth. “Valuations aren’t cheap anymore, but there’s a clear earnings visibility,” he said, pointing to a market structure dominated by two strong players, with a third whose survival depends on the former raising prices — a rare game-theory sweet spot

Consumption could emerge as the next pocket for earnings upgrades, but early signs are still elusive, says Rahul Singh, CIO of Tata Mutual Fund.

“The starting point has to be where expectations are lowest — and today, that’s consumption,” Singh told N Mahalakshmi on the Wealth Formula podcast. He clarified that this wasn’t about valuations, but about earnings: “In terms of earnings, consumption has seen three or four quarters of successive downgrades. That becomes your starting point for identifying where the earning upgrades could happen.”

However, the sector remains a ‘second-half story’ — often spoken of, but rarely materialising with conviction. This time though, Singh pointed to multiple tailwinds that could help: easy liquidity, lower rates, reduced income taxes, and a strong push by banks and NBFCs to lend.

Watch the full interview here: Forget Trump Tariffs, Rate Cuts. Find Sectors with Earnings Explosions and Re-rating Stories

“The macro is there. The micro has to show results. No early signs as yet, I would say,” he said.

Also read: ‘Why would you not be bullish?’ — Tata MF’s Rahul Singh makes the big case for healthcare

Cement – earnings upgrade candidate
Cement is another sector Singh is bullish on. While the past two years have been marked by volatility, there are signs of pricing discipline among players outside the top two groups. “There seems to be an understanding that pricing has to be held and profitability has to be improved,” Singh said, adding that sensible competition could pave the way for earnings improvement.

Telecom – stable cash flows
Singh also made a strong case for owning telecom stocks, calling them “stable, high-operating-leverage businesses with pricing power,” although he cautions that the sector's history shows technology-driven disruption is always the key risk to watch.

The veteran fund manager, who has also been a telecom analyst earlier, drew parallels between telecom and healthcare, saying both sectors offer steady 12–15% growth. “Valuations aren’t cheap anymore, but there’s a clear earnings visibility,” he said, pointing to a market structure dominated by two strong players, with a third whose survival depends on the former raising prices — a rare game-theory sweet spot.

“There’s nothing stopping these companies from growing. They’re like utilities, except with pricing power — which they haven’t even fully used,” he said, adding that any meaningful tariff hike could send 80% of the incremental revenue straight to EBITDA, thanks to the sector’s high fixed-cost structure.
But he also warned that while the risk of disruption may be low today — “5% to 10% probability” — telecom's past proves that risk often comes from left field. “Whether it was CDMA, wireless in local loop, or Jio’s entry, every downcycle was triggered by a new technology. You cannot discount that.”

Still, current market dynamics leave the big two — Reliance Jio and Bharti Airtel — in enviable control. While organic ARPU upgrades are already happening, companies are holding off on large price hikes for now to avoid attracting political or technological backlash.

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