“Markets are waiting with bated breath for earnings to revive, 6-8% earnings growth. This 24,000–25,000 level does tend to look full, but given the rate cut cycle that we are in, further rate cuts cannot be ruled out, one coming in October, and on the back of the Federal Reserve again, that would be a virtuous cycle of rate cuts that would happen in India also and markets would tend to overshoot. So yes, the markets are range bound, and the range is a large one between 24,000 and maybe 27,000–28,000 for the next six–nine months,” said Manish Sonthalia offering his perspective on current market dynamics in an interview with ET Now.
Manish Sonthalia from Emkay Investment Managers noted that the GST rate implementation on September 22 is likely to delay the consumption-led earnings revival. “October quarter is going to be similar to what the June quarter was. One is building in revival in earnings in the second half of the year on account of the fact that first of all you have consumption impetus coming in from the government in the form of, let us say, income tax cuts. That also is likely to play more towards the second half of this year, plus GST, plus going forward into the next year we are also looking at 8th Pay Commission recommendations helping the consumer basket. So, market has priced in some bit of that consumption revival, consumption boom already, but more to come.”
He highlighted specific sectors that could see positive momentum. “Consumption, capital markets, infrastructure, insurance, banks, more so the public sector banks, even on the valuation front not so much on the news flows front, but yes, it is also a buy. And I would tend to believe that even pharma, CDMO, the outlook looks pretty promising. So these are going to be some of the sectors where things would look good. Earnings revival continues for your capital goods related thing, but there the problem is valuation, nothing more than that.”
Discussing the impact of the festive season and potential market triggers, Sonthalia emphasized a cautious optimism. “No, it is not a wait and watch. It is a buy on dip only. Valuation is likely to expand on falling rates, that is one. Secondly, if Nifty 50 earnings growth for the first quarter was 8% and similarly if you are building in, let us say, 6% to 8% sort of an earnings growth for the second quarter and the full year earnings growth for FY26 is likely to be 10–11%, then the second half is likely to be something like 12–13%. And markets basically are waiting with bated breath to see that revival in earnings growth from 8% to 12–13%. If that happens, definitely we think that there is going to be a floor to the market fall and things should revive from there.”
He added that while consumption themes will drive earnings momentum, investment-related sectors such as power, renewables, and power transmission will also contribute, though valuations remain a concern. “The heavy lifting of the earnings is likely to come from consumption going forward,” Sonthalia concluded.With markets poised between optimism and caution, investors appear to be navigating a “buy on dip” approach, keeping a close eye on earnings growth, policy measures, and consumption trends in the coming months.
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