Indian equity benchmarks experienced significant pressure in September, with the BSE Sensex tumbling 1.42%, or 1,048 points, to 72,847.43, while the NSE Nifty50 declined 1.38%, or 330 points, to 22,822. According to reports from Essential Business Intelligence, the broader market indices also faced selling pressure, with the Nifty Midcap 100 down 1.36% at 60,080.70 and the Nifty Smallcap 100 declining 1.41% to 19,438.25. In September alone, the Nifty 50 and Sensex dropped 6.1% and 5.8% respectively - marking their steepest single-month decline following GDP data release since March this year. The Nifty Midcap 100 and Nifty Smallcap 100 indices were down 7.6% and 3.4% respectively in September.
Despite current market weakness, Vinay Jaising of ASK Private Wealth highlighted that earnings momentum is moving faster than stock prices, while Enigma Investment Partners CIO Viraj Mehta expects strong Q2FY27 earnings for small and mid-cap companies. However, latest analysis from The Economic Times reveals that India Inc is likely to see a dip in earnings performance for Q2 in comparison to Q1, with analysts forecasting a growth slowdown of roughly 13-14%. This moderation comes despite a relatively favourable comparison base, as the September 2025 quarter had seen Nifty profit growth of around 2%, according to Anand Rathi Share and Stock Brokers. Antu Eapen Thomas, Senior Research Analyst at Geojit Investments, noted that Q1FY27 delivered a strong earnings surprise with broad-based improvement across consumption, exporters, BFSI and commodities, with revenue growth also strengthening, indicating that earnings recovery is increasingly being driven by top-line expansion rather than solely margin gains.
Enigma Investment's Viraj Mehta is particularly bullish on consumer companies, predicting that inflation will drive automatic revenue growth that was absent in previous cycles. According to CNBC TV18, Mehta estimated that inflation for consumer companies could reach the high single digits or early double digits this year, with a 5 to 7% volume growth translating into early to mid-teens revenue growth. This pricing dynamic is expected to lead to margin expansion for consumer companies in the latter half of the current year, making them attractive investment opportunities despite short-term headwinds from raw material costs and freight rates.
Both experts maintain selective sectoral approaches with clear avoidances. Vinay Jaising remains positive on the defence sector and financials while expressing underweight stance on energy, realty and large-cap IT companies. As reported by Essential Business Intelligence, he stated 'We are looking to invest in IPOs' while maintaining his positive outlook. Enigma Investment's Viraj Mehta is avoiding everything in IT and technology, stating 'We are just avoiding everything in IT', while making exceptions only for the pharmaceutical sector regarding US exposure. He remains highly bullish on capital expenditure-driven pipe companies as a key investment pocket. Looking ahead to Q3, Tanvi Kanchan from Anand Rathi highlighted that the base effect does its most work in Q2, and it fades after that, with the December 2025 quarter saw Nifty profits grow 7%, that is still a modest base, but it is much tougher than Q2's 2%. She pointed to system credit growth of around 17% and private capex holding up, with capacity utilisation at about 75%, as indicators of underlying economic activity.
As the base-effect support fades, sectors that rely heavily on margin recovery or have limited pricing power could face greater pressure if input costs remain elevated. Kanchan noted that Brent crude was back above $106 a barrel amid US-Iran tensions, with sustained higher crude prices potentially adding margin pressure for companies unable to pass on higher costs. She emphasized that OMC earnings, crude-linked chemicals and consumption names with limited pricing power will find it hard to hold growth if oil stays above $100. The distinction between headline earnings growth and underlying operating momentum could consequently become more important as the year progresses, with investors advised to be realistic about estimates, as consensus FY27 Nifty earnings were cut 9% in the year to May.
