Skilled view: Neeraj Chadawar, the top of elementary and quantitative analysis at Axis Securities, forecasts Nifty to ship quarterly income, EBITDA and PAT progress of three.9 per cent, 3.9 per cent and three per cent YoY, respectively, in Q1FY26. Speaking to Mint, Chadawar emphasised that markets will largely be earnings-driven in FY26, with a significant earnings uptick within the second half of the yr. He additionally shared his views on sectors he’s optimistic about, the impression of the commerce conflict and his Nifty goal. Listed below are edited excerpts of the interview:
What are your expectations from Q1 earnings? How do you count on it to impression market sentiment?
The Q1FY26 earnings season has been marked with fascinating occasions equivalent to (i)geopolitical rigidity, (ii) volatility in crude costs, (iii) rate of interest cuts, (iv) unseasonal rainfall, (v) provide chain disruptions, and (vi) bettering liquidity.
These developments point out that the Q1FY26 earnings season is anticipated to exhibit a combination pattern, just like the patterns noticed in earlier quarters, although some breather is anticipated because of sequential enchancment in a couple of high-frequency indicators.
Nevertheless, the broader consumption demand might nonetheless take one or two quarters to get again on observe.
Many of the earnings-related considerations are actually behind us. Whereas the depth of downgrades is more likely to decelerate from right here onwards, the market is one or two quarters away from the potential upgrades.
Many of the significant actions are more likely to be seen within the second half of the monetary yr (H2FY26), linked with the potential uptick within the financial momentum.
General, earnings enchancment is anticipated in sure sectors, equivalent to telecom, financials, supplies, oil and gasoline, and industrials, whereas auto OEM (authentic tools producer), utilities, and metals will proceed to face some stress.
Based mostly on our consensus estimates, we forecast Nifty to ship quarterly income, EBITDA and PAT progress of three.9 per cent, 3.9 per cent and three per cent YoY, respectively. Furthermore, excluding Tata Motors, Nifty PAT is anticipated to develop by 4.3 per cent YoY.
How can traders navigate the present commerce conflict uncertainty? Ought to traders brace for less than reasonable returns in 2025?
The Indian economic system is well-positioned. Regardless of exterior dangers, India’s home progress trajectory stays intact, with key macroeconomic elements supporting a stronger FY26 in comparison with FY25.
Each the RBI and the federal government are offering help to the Indian economic system by means of pro-growth coverage measures.
Whereas macroeconomic threat will proceed to drive the market course for one more couple of months, the vast majority of the negatives associated to commerce uncertainty are behind us.
The continued earnings season is crucial for the market course going ahead, and the administration commentaries and steering might be essential.
We count on near-term consolidation available in the market, with breadth seemingly remaining slender within the speedy time period.
If trade-related uncertainty eases additional and no main unfavorable surprises in Q1FY26 earnings emerge, the market is more likely to make a brand new excessive within the upcoming earnings season.
The trajectory for FY26 would largely be earnings pushed, with a significant earnings uptick in H2FY26.
So, on a direct foundation, will probably be a inventory pickers market, and an uptick in financial momentum might result in a broad-based restoration within the second half.
The Indian economic system can develop above 6% in FY26, however will or not it’s sufficient to draw overseas funds?
FY26 is anticipated to current a extra constructive surroundings for overseas flows in comparison with FY25, pushed by bettering home fundamentals when it comes to earnings expectations and proactive coverage measures.
Many of the earnings-related considerations are factored in FY25, and the FY26 earnings prospects have improved considerably.
The depth of downgrades is more likely to decelerate farther from right here onwards, pushed by the RBI’s liquidity help, together with a CRR minimize, the rate of interest minimize of 100 bps, supporting credit score progress restoration, company earnings in FY26, and a consumption-oriented Union Price range.
That mentioned, world macro dangers proceed to warrant shut consideration.
Whereas India stays comparatively higher positioned amongst rising markets, overseas traders are more likely to take a calibrated method, balancing optimism round India’s structural story with warning round world headwinds.
Do you continue to discover worth within the home consumption theme?
FY25 was a difficult yr for the home economic system, led by a slowdown in authorities capex, increased inflation and rates of interest, slower credit score progress, and moderation in city consumption.
These elements impacted the general home consumption, resulting in earnings moderation. A sequence of measures undertaken by the federal government and the RBI since December 2024 point out a possible pick-up in financial actions in H2FY26.
The general consumption theme has not delivered a significant return within the final couple of years, and the probabilities to bounce again from H2FY26 onwards are excessive.
On this regard, the progress of a well-distributed monsoon is vital, and the upcoming competition season (Ganesh Chaturthi) will set the tone for future consumption tendencies.
What needs to be our technique for export-oriented sectors? Ought to we utterly keep away from them?
Presently, all the foremost export-oriented sectors are in a wait-and-watch mode.
We proceed to keep up our underweight stance on the IT sector. We foresee a slowdown in general IT spending within the US market, and a possible delay in discretionary spending might pose a downgrade threat within the upcoming quarters.
Therefore, the continued earnings season is essential, and we proceed to watch administration commentaries and the steering for the remaining FY26.
Whereas macroeconomic uncertainty has diminished considerably within the final three months, we aren’t out of the woods but.
Therefore, significant developments associated to the worldwide economic system’s uptick should be keenly watched as they’re key set off factors for the export demand uptick. The market continues to stay watchful for these developments.
What sectors can generate alpha within the subsequent one to 2 years?
Within the present surroundings, our focus stays on progress at an inexpensive worth, ‘high quality’ shares, monopolies, market leaders of their respective domains, and domestically-focused sectors and shares.
These, we imagine, might outperform the market within the close to time period.
Based mostly on the present developments, we (i) proceed to love and chubby BFSI, telecom, consumption, hospitals, and interest-rate proxies, (ii) proceed to keep up a optimistic view in chosen retail consumption and FMCG play based mostly on the restoration expectations in FY26, and (iii) favor sure capex-oriented performs that look enticing at this level in mild of the current worth correction in addition to affordable progress visibility within the home market in FY26.
What’s your tackle the present valuation of the Indian inventory market? Do you discover it sustainable?
Based mostly on the present improvement, we current three situations for the Nifty 50 by March 2026:
(i) Bull case: Nifty goal of 27,600 by March 2026, valued at 21 instances, assuming a Goldilocks situation and personal capex increase.
(ii) Base case: Nifty goal of 26,300 by March 2026, valued at 20 instances on March 2027 earnings. (Not too long ago, we upgraded our base case a number of to twenty instances from 19 instances earlier to issue within the beneficial addition of excessive PE shares within the index, during which Jio Monetary and Everlasting have changed Britannia and BPCL.)
(iii) Bear case: Nifty goal of twenty-two,300 by March 2026, valued at 17 instances, assuming coverage shifts, inflation challenges, and recession dangers.
Many of the positives are already in worth on the index degree. Therefore, the market efficiency will largely be pushed by earnings progress going ahead.
On a direct foundation, will probably be a inventory pickers market, the place bottom-up inventory selecting with a concentrate on high quality, market share, margins, and earnings progress will play a significant position in alpha era.
As soon as we progress in the direction of FY26, extra sectors will be part of the rally based mostly on the revival expectation of home financial momentum.
Contemplating prevailing uncertainties, what needs to be our fairness funding technique at this juncture?
We advise a well-diversified method with the precise mixture of defensive, curiosity rate-sensitive and cyclical sectors.
Within the present surroundings, we favour three themes: high quality, progress at an inexpensive worth, and the earnings restoration theme to generate passable returns within the subsequent 12-18 months.
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Disclaimer: This story is for instructional functions solely. The views and suggestions expressed are these of particular person analysts or broking companies, not Mint. We advise traders to seek the advice of with licensed consultants earlier than making any funding selections, as market circumstances can change quickly and circumstances might range.
