India expects earnings growth of 16 to 18% in FY27, with likely winners in consumer stocks: Mark Matthews

Global market strategist Mark Matthews of Julius Baer expects a significant recovery in earnings growth for Indian equity markets from next fiscal as policies such as VAT cuts and income tax cuts start to impact corporate profits.Speaking to ET Now, Matthews said: “I think this will happen in the next quarter. It didn’t happen in the current quarter because the GST cuts didn’t really happen until the last week of September and so people were waiting for that. So we’ll have to be patient, I would say during the next quarterly results, but beyond that I expect an acceleration and numerous anecdotes already show us that we’ll see that. So for FY27, which of course is the period from March next year onwards, we have to expect earnings growth from around 16% to 18% for the Nifty, and if we are right, that is a strong case for the market to rise next year.”

When asked which sectors could benefit most from the positive earnings numbers, Matthews acknowledged the limits of his sector-specific insights but pointed to consumer stocks as likely winners. “I’m sorry I don’t actually have that much sector insight. My apologies. But I’m just saying intuitively that with these big cuts in GST and income tax, you would think that consumer stocks would benefit the most. I think there are so many interesting things to look at in the Indian market. I don’t tend to be sector specific, but the consumer is intuitively the one you would expect to benefit from the changes in the tax regime this year and benefit from the fall in interest rates.”

On a global level, Matthews discussed recent political developments in the US, including the possible reversal of a government shutdown. He said: “I don’t really think there’s that much of an impact on the rest of the world, other than sentiment. But if you look at surveys about what people are worried about, the government shutdown was actually never rated that highly, I think, because people rightly realized that it wasn’t going to last much longer and I doubt it will continue for the next few days. It looks like they’re coming to an agreement.”

He added: “The biggest concern in America is that the labor market is turning, and it is changing too quickly for the Federal Reserve to act in time to stop it. For the record, I don’t think that concern is legitimate, but it has been catalyzed by private sector data, specifically a job loss report from a company called Challenger Gray & Christmas, an outsourcing company, and they have calculated that 153,000 jobs were cut in October, which is what these concerns about the labor market has really caused and Due to the lack of official government data due to the closure, we are somewhat in the dark.”

Matthews also highlighted other labor market indicators, pointing out that key metrics remain healthy. “But there’s some other data we need to look at, and the payroll numbers from the automated data processing companies show a healthy October. The Chicago Federal Reserve makes its own estimate for the unemployment rate, which shows it’s still at about 4.3%. And finally, if you tabulate all the initial state-level unemployment claims, that key labor statistic is only trending sideways. So the government shutdown, I don’t think, will last much longer and I don’t think it will be a major problem The bigger problem is the concern about the labor market, but I also think that is exaggerated.’ Market experts will now keep a close eye on the upcoming quarterly results and early FY27 trends, which could validate Matthews’ projections and provide direction to investors for the next fiscal year.