Market veteran Nimesh Chandan has turned constructive on India’s earnings outlook, expecting a clear acceleration in corporate profit growth from the second half of FY26, with momentum carrying into FY27.
Here are the key takeaways from his view:
What’s driving the earnings recovery?
1. Operating leverage kicks in
- Revenue growth is expected to improve while cost pressures ease, helping margins expand
- Many sectors are operating below peak utilisation, allowing profits to grow faster than revenues
2. Interest rate tailwinds
- With rate cuts already delivered, borrowers should see relief on financing costs
- Better credit transmission in FY26 could boost profitability, especially in capital-intensive sectors
3. Rural and urban demand revival
- Gradual recovery in rural consumption, helped by normal monsoons and government spending
- Urban demand remains resilient, supporting discretionary and services-led earnings
4. Capex and infra cycle
- Public capex continues, while private investment intentions are improving
- This supports earnings in industrials, capital goods and ancillary sectors
Earnings trajectory outlook
- H1FY26: Mid-single-digit growth due to base effects and muted demand
- H2FY26: Move toward double-digit profit growth
- FY27: Potential mid-teens earnings growth, provided macro stability holds
Sectoral preferences
- Financials: Beneficiaries of rate stability and credit growth
- Industrials & capital goods: Operating leverage from capex cycle
- Consumption (selective): Recovery-driven upside, especially in rural-linked segments
- IT & exports: Gradual improvement as global demand stabilises
Market implication
- Current market valuations appear more supportive of large-caps
- Stock selection will matter more than broad-based rallies
- Earnings delivery, rather than liquidity alone, will drive returns in FY26–FY27
Bottom line
Nimesh Chandan sees the current phase as a setup year, with earnings momentum expected to strengthen meaningfully from H2FY26 and peak into FY27, creating a healthier foundation for equity returns—especially for quality, earnings-led stocks.
