Bandyopadhyay noted that corporate earnings have surprised positively after a weak start to 2025. “Q2 numbers came in much better than feared, and expectations for Q3 and Q4 are even stronger,” he said. He attributed the improving outlook to GST rationalisation, income tax relief announced in the previous Budget, expectations around pay commission revisions, and a visible pickup in consumption demand during the festive and winter season.
According to him, anaemic consumption that weighed on earnings earlier has started to revive, which should translate into healthier corporate performance in the second half of the financial year. However, he cautioned that domestic factors alone may not be sufficient to trigger a sustained market uptrend.
“Corporate earnings will improve, but the real bump-up in markets will come when FIIs start buying back into Indian equities,” Bandyopadhyay said. He pointed out that despite positive domestic developments, FIIs have remained net sellers due to concerns around valuations, global geopolitical risks, and the absence of clarity on an India–US trade deal. India’s relatively higher valuations compared with other Asian markets have also weighed on foreign participation.
Shrinkage in billionaire wealth not a sign of deeper economic distress
On the recent shrinkage in billionaire wealth, Bandyopadhyay said it should not be read as a sign of deeper economic distress. “These calculations depend on the time period and listed market performance. Sectoral underperformance naturally impacts promoter wealth,” he said, citing IT and select real estate segments as examples. Over the medium term, he expects India’s strong growth trajectory to add more names to the billionaire list.
He also dismissed the idea that recent trends indicate excessive concentration of wealth. “Different sectors perform at different times. Promoters diversified across sectors tend to see steadier wealth creation,” he said, adding that offer-for-sale transactions and private market wealth creation are often not captured in billionaire rankings.
Looking ahead to policy triggers for a broader market rally, Bandyopadhyay said rationalisation of capital gains tax and securities transaction tax (STT) could significantly improve investor sentiment, particularly among FIIs. “These taxes complicate returns and reduce post-tax gains for foreign investors compared to other markets,” he said.
Ultra-low inflation a key macro risk
Finally, he flagged ultra-low inflation as a key macro risk. While falling inflation may appear positive, Bandyopadhyay warned that persistently low or negative inflation could hurt nominal GDP growth and rural incomes, eventually impacting consumption. “The economy needs healthy inflation of around 3–4%. Monetary and fiscal policy must work together to ensure that,” he said.
Overall, Bandyopadhyay remains constructive on India’s long-term outlook, stressing that improving earnings, policy clarity, and the return of foreign capital will be crucial for markets to move from a selective, range-bound phase to a sustained rally in 2026.