India Inc's earnings outlook remains relatively constructive despite heightened geopolitical uncertainty, with Corporate India capable of delivering 12-13% earnings growth, according to Ashwini Agarwal, Founder of Demeter Advisors LLP. This optimistic outlook is supported by robust underlying corporate performance, with Q1FY27 showing significant improvement across key metrics. According to an analysis by Bank of Baroda economist Aditi Gupta, for a sample of 2,623 companies, sales growth accelerated to 17.5% year-on-year in the June quarter from 5% in the year-ago period. Profit growth also accelerated to 23.7% from 7.3%, after excluding the BFSI and crude oil sectors.
Against this earnings backdrop, Agarwal said large-cap stocks look attractive from a valuation perspective. His view comes as investors contend with heightened geopolitical uncertainty and volatility across global markets. Rather than attempting to predict when the broader market will bottom, the focus should shift towards individual companies and their earnings prospects. Agarwal expects traders to opt for a bottom-up strategy in a weak market, noting that bottom-up investing has been rewarding in India. This approach puts greater focus on individual companies and their fundamentals rather than attempting to make a broad market call.
Geopolitical uncertainty remains a key concern for Indian equities, with Agarwal describing the US-Iran war situation as completely unpredictable. He said he does not know when US-Iran hostilities will cease, making it difficult for investors to assess how long the geopolitical overhang could persist. The war is also causing disinterest among foreign institutional investors (FIIs) in Indian markets, according to Agarwal, adding another layer of uncertainty for domestic equities. Despite these challenges, the rupee looks relatively stable amid the current environment, though Agarwal described the overall market conditions as 'scary' for investors.
The Q1 performance indicated that underlying growth momentum remained intact, with consumption and manufacturing continuing to support corporate earnings. Companies managed cost pressures through calibrated price increases, supply-chain changes, inventory management and cost optimisation. The improvement came despite elevated commodity and currency volatility and higher operating costs during the quarter. With Corporate India capable of delivering double-digit earnings growth and large-caps looking attractive on valuations, Agarwal's message emphasizes that a bottom-up approach focused on individual companies could prove more useful as markets navigate the uncertainty.
