Speaking to ET Now, Chowhan said the earnings season so far has been largely uneventful. “Not much of surprises in Q3. At the same time, there are not much of upgrades also. What India wants is some bit of upgrades for the FII interest or the investor interest to come back, so that has been lacking so far,” he said. He added that the quarter has largely played out in line with expectations, making the March quarter a more critical test for growth trends.
Chowhan believes the sustainability of growth in the fourth quarter will be closely watched by the markets. “Q4 is the key test. If growth picks up in Q4, then that is something that the market is waiting for. Q3 so far is in line, not much to read about,” he said.
On the impact of GST cuts and consumption-related measures, Chowhan noted that much of the positive impact has already been factored into expectations. “The estimate has already got built in that there is going to be an upswing because we get monthly data for car sales, monthly data for other industries also, so that is no longer a surprise,” he said. While sectors that benefited from GST cuts have reported strong numbers, he cautioned that this momentum is already priced in by the market.
Looking ahead to the March quarter, he said consensus expectations are relatively muted, which could leave room for a positive surprise. “4Q now people are expecting that numbers will be slightly lower than 3Q because the base effect is not there, the GST benefit is not there, but that could surprise. The momentum can sustain, that is what we feel and that would be the real surprise the market is waiting for,” Chowhan said.
Beyond earnings, Chowhan sees the Union Budget and global trade developments as potential near-term triggers. He said low expectations around the Budget could work in the market’s favour. “Since expectation is low, budget can give you a trigger kind of thing,” he said, while noting that the government’s handling of lower revenues following tax cuts will be closely monitored.
He also highlighted ongoing trade negotiations as an important variable for markets and currency movement. “Since the EU FTA trade has already happened, I believe there is enough of pressure on US to conclude their trade deal also,” Chowhan said. He added that a softer dollar index and pressure on the US to manage currency levels could influence trade outcomes.According to him, tariff levels will be a key swing factor. “If the final tariff number is below 20 or say below 25, then it could be a meaningful effect for the market because market has already digested the tariff is going to be between 20 to 25. If it is below 20, markets can rally,” he said.
On market segments, Chowhan said the recent correction in broader markets is improving the risk-reward in midcaps. “Three months back largecaps made much more sense. Today, the way markets have corrected especially in the mid and smallcap in the last month or so where stocks are off 30–40% from their highs, I think the balance is shifting towards midcaps,” he said.
While largecaps may still lead initially when markets resume an uptrend, Chowhan expects midcaps to outperform over a longer horizon. “Eventually over a one-year time frame in the balance 6, 7, 8 months midcaps will outperform largecaps, that is what we feel,” he said, citing improved valuations as a key factor.
In terms of sectoral strategy, Chowhan said financials have already delivered strong performance and have been a consensus trade. Going forward, he sees opportunities emerging in other areas. “Incrementally from here on pharma can do well. I think chemicals can do well,” he said.
He also pointed to export-oriented sectors that could benefit from improved trade ties with Europe. “Sectors which will benefit out of the EU trade, so export companies like even say textiles or garmenting companies or even cap good companies who export to EU, these sectors can be in the limelight in the coming months,” he said.
Additionally, Chowhan said cement could see a cyclical pickup. “We are heading into the year-end season where typically the demand picks up and from a low base cement stocks can also do well,” he added.
Overall, Chowhan believes a combination of fourth-quarter earnings, Budget announcements and global trade developments will shape market direction in the near term, with selective opportunities emerging in midcaps and export-oriented sectors.
