Market expert Rajeev Agrawal from DoorDarshi India Fund emphasizes that earnings delivery, particularly for FY27, will be the key driver for future market movements, not just macro triggers. According to reports from The Economic Times, while global markets are cautiously optimistic about a potential US-Iran agreement easing geopolitical risks and crude oil volatility, Indian equity markets remain restrained. Agrawal noted that improved earnings visibility, particularly in smallcap and midcap segments, could support markets heading into FY27. This view aligns with Morgan Stanley strategists who see US stocks getting an additional boost from a rotation into cyclical, economically-sensitive industries that have lagged during the Iran war period.
Despite a sharp decline in crude oil prices, Indian equities have not witnessed a broad-based rally, reflecting a more valuation-conscious market rather than a risk-on environment. As reported by The Economic Times, Agrawal explained that markets are still adjusting after a period of elevated valuations, which has led to a time correction rather than a sharp price correction. He highlighted that valuations are now closer to median levels, which is a healthier setup for future gains. The S&P 500 is only about 2% below its record high, with hopes for a lasting US-Iran agreement boosting risk sentiment. Attention is shifting to upcoming central bank decisions, with the Bank of Japan, US Federal Reserve, Reserve Bank of Australia, and Bank of England all in focus.
On sector positioning, Agrawal continues to favour domestic-focused themes, particularly real estate and financials. According to The Economic Times, he highlighted that real estate companies are witnessing strong pre-sales momentum and robust project pipelines, especially in key urban markets. The sector's transition from unorganised to organised players is becoming visible in earnings and operational performance. On financials, he reiterated his bullish stance on lending companies, noting that corrections in stock prices have provided selective opportunities for accumulation. Morgan Stanley's Michael Wilson reiterated his bullish stance on under-owned cyclical sectors such as consumer discretionary, transports and regional banks, noting that sentiment and positioning remained "bearish and muted," despite recent outperformance versus the S&P 500.
While domestic flows into India remain strong, foreign institutional investor outflows continue to be a concern. As reported by The Economic Times, Agrawal pointed out that if major economies begin tightening or normalising rates further, it could lead to capital staying within domestic markets, as local bond yields become more attractive. He stressed that the next meaningful move for markets will depend on earnings delivery, while noting that pockets of euphoria are still present, making the overall market less compelling on a broad basis. The recent decline in US equities, led by memory-chip stocks, stemmed from moderating earnings momentum rather than weakening fundamentals, according to Wilson, with such pullbacks being common during earnings-led bull markets.
