“We are seeing average earnings growth of over 15% among companies reporting so far – that’s a good start,” Shenoy said in an interview with ET Now. “Largecaps could benefit if sales to foreign investors decline or reverse, given the higher concentration of FIIs in these names.”
Earnings resilience and GST are surging ahead
Shenoy noted that while the broader market has remained stable despite external headwinds, the next phase of earnings growth could be driven by consumption-led demand as GST benefits start to flow through.
“We expected the GST impact to be reflected only in the October-December quarter, so stronger performance from consumer names could still be on the horizon,” he said.
He added that medium and small companies have shown healthier profit growth so far. “When we look at pure economic growth data, it’s the smaller companies that are leading the way,” Shenoy noted.
Largecaps are getting relief as FII flows stabilize
While largecaps like Reliance Industries, HDFC Bank and select financial majors have taken the lead lately, Shenoy believes the performance gap between market segments could narrow in FY26. “Flows are a key factor. FIIs have kept largecaps muted compared to midcaps, but any reversal there could push the Nifty higher,” he said.
Portfolio tilt: focus on healthcare, automotive and industry
In terms of sector positioning, Shenoy said Capitalmind’s quantitative portfolios are currently focused on healthcare, auto and industrial sectors, supported by solid metrics and earnings improvements.
Healthcare: “India’s healthcare sector remains underpenetrated and undervalued. There is stable growth potential, especially after the CGHS rate hikes,” Shenoy said.
Automobiles and durable goods: “Auto companies are seeing strong volume and margin recovery, aided by GST changes and festive demand.”
Industry: “Order flows have been strong and we expect this to translate into profit growth in the coming quarters.”
He added that financial institutions, especially large private banks and NBFCs, continue to deliver consistent performance, while FMCG and textiles remain relative weak spots due to valuation and export concerns.
‘India’s growth story intact despite global volatility’
Shenoy emphasized that domestic macro fundamentals – including lower inflation, steady liquidity and resilient corporate balance sheets – remain key strengths for Indian markets.
“Even under external pressure, India’s structural growth story is intact. Industrial order books are strong, private investment is returning and policy stability remains a tailwind,” he said.
Outlook: Balanced optimism with sector rotation in prospect
While Shenoy remains ‘naturally long’ on India’s growth prospects, he sees sector rotation as a defining theme for the coming quarters.
“The financial sector is likely to provide stability in the short term, while the auto, healthcare and industrial sectors could deliver alpha,” he added. “Earnings visibility is improving and the FY26 setup looks encouraging.”
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