Speaking to ET Now, Vijayakumar said Q2 earnings have largely met expectations but the real acceleration will begin in FY27 as multiple sectors regain growth momentum.
“We expect a big pick-up in earnings growth from Q3 onwards and substantial acceleration in FY27,” Vijayakumar said. “FY26 earnings growth will likely be around 8–9%, as IT—the second-largest profit pool—is performing poorly. But that scenario will change next year.”
Consumption, financials, and defence to lead FY27 earnings rally
Vijayakumar expects a revival in earnings across key consumption-led segments such as automobiles, white goods, aviation, telecom, and hospitality, driven by strong demand and easing borrowing costs.“Low inflation, a softer interest rate regime, and higher disposable income due to tax cuts will keep consumption strong,” he said. “We’re super bullish on domestic consumption themes as the external scenario remains uncertain.”
He added that leading banks, especially in the PSU segment, will play a key role in the next earnings upcycle due to robust credit demand and attractive valuations.
PSU banks, defence stocks offer attractive valuations
According to Vijayakumar, while overall market valuations remain elevated at a Nifty FY27 estimated PE north of 20, select sectors still offer room for upside.
“For the market as a whole, there is no valuation comfort,” he said. “But PSU banks are attractively valued between 1 to 1.5 times price-to-book. With possible mergers ahead, there’s more room to go.”
He also highlighted defence and shipping stocks as strong medium-term opportunities, citing robust growth prospects and government support.
Cautious optimism amid global uncertainty
While domestic demand remains a bright spot, Vijayakumar cautioned that global headwinds—particularly weak export demand and geopolitical uncertainties—could keep India’s external outlook “a little cloudy” in the near term.
Still, he believes the Indian equity market will begin to discount FY27’s stronger earnings cycle in the months ahead.