Speaking to ET Now, Mayuresh Joshi, Head Equity, Marketsmith India said the earnings season so far has delivered mixed results. “Earnings so far have been a mixed bag. PSU banks have largely held up in terms of their earnings delivery. But apart from that, it has been in line with estimates or a tad bit below par so far in terms of numbers that we have probably seen,” he said.
However, Joshi believes the earnings outlook could improve meaningfully as the year progresses. He pointed out that once channel inventory rationalisation plays out post-GST, especially across consumer durables, discretionary and staple segments, numbers could see a sharp rebound. “Somewhere down the line, as we head into Q4, numbers should start coming back very, very strongly,” he noted.
He added that earnings growth expectations over the next 12 to 15 months are significantly better than recent quarters. “The expectations as a base case scenario in terms of earnings growth spread over the next 12 to 15 months plays out to be anywhere between 12% to 14%, which is significantly higher than what we have discussed or witnessed in the past few quarters,” Joshi said.
That said, global events remain a key overhang. According to Joshi, markets could remain volatile depending on geopolitical developments and trade-related commentary from the US. “Barring global events, specifically Trump tariff tantrums and Trump geopolitical tantrums, the markets might be volatile for some period of time because it really depends on what statements he probably makes,” he cautioned.
On the positive side, Joshi highlighted the potential impact of international trade agreements. “The India-EU FTA deal might be a game changer and might be a massive game changer for India as that fructifies. If by some stroke of luck we do get a US trade deal over the next few days and weeks, it will allay the nerves that the markets probably had and then it will focus back to earnings,” he said, adding that he does not foresee a structural downside for equities.
He also acknowledged a rise in distribution days tracked by Marketsmith India, but stressed that such phases often create opportunities. “Our founder always used to say that such pessimistic times are the best times to find out good sectors where leadership stocks are making basis for the next bull run to come,” Joshi remarked.Meanwhile, select small and mid-sized banks have emerged as recent outperformers, with strong price action following earnings announcements. Stocks such as CreditAccess Grameen, Ujjivan and Bandhan Bank have been in focus amid signs of improving fundamentals.
Joshi said expectations for small finance and payment banks are improving as stress in the ecosystem begins to ease. “The broad expectation when it specifically comes to small payment banks is the ecosystem should generally smoothen out over the next few quarters,” he said, noting that earlier challenges stemming from MSME slowdowns and delinquency issues appear to be stabilising.
As growth expectations strengthen, Joshi believes asset quality pressures are likely to moderate. “Expectations of asset quality pressures expected to wane out might probably be an improvement both in terms of reported numbers and specifically return ratios is something that the street is probably looking at,” he said.
On CreditAccess Grameen specifically, Joshi highlighted improving operational metrics and balance sheet strength. “The cost-to-income ratios have come down quite nicely over the last few quarters. The expectations in terms of how GNPAs and NPAs are now getting placed are relatively better off compared to the last few quarters,” he said.
He added that strong capitalisation provides room for growth. “Capital adequacy is close to 25.5% as far as Tier I ratios are concerned and therefore, extremely well capitalised to probably ensure that there is a strong advances growth on the balance sheet that probably happens,” Joshi said.
Overall, while near-term volatility cannot be ruled out, the improving earnings outlook and stabilising financial sector trends suggest that markets may be better positioned as they head into the next financial year.
