India’s equity markets are poised for a festive rally as corporate earnings enter an upgrade cycle, according to Sonam Srivastava, Founder and Fund Manager at Wright Research PMS. With the Nifty and Sensex showing signs of renewed momentum, Srivastava believes the stage is set for fresh highs around Diwali, driven by stabilizing macro indicators, easing global liquidity, and resilient domestic demand.
In a recent interview, Srivastava stated that the downgrade cycle for India Inc has likely peaked after nearly 18 months of earnings pressure. “We are now entering a phase where upgrades will dominate. Commodity prices have stabilized, IT order inflows are bottoming out, and financials continue to deliver double-digit credit growth,” she said.
The optimism is backed by improving fundamentals across sectors. While the last few quarters saw muted revenue growth and margin compression, the outlook for H2FY25 and FY26 is turning positive. Srivastava expects consensus earnings to grow at a compound annual rate of 15% through FY26, making India one of the most attractive equity markets globally.
Key Drivers of India Inc’s Upgrade Cycle
| Factor | Impact on Earnings Outlook | Sectoral Beneficiaries |
|---|---|---|
| Stabilizing Commodity Prices | Margin recovery, cost efficiency | FMCG, Cement, Auto |
| Bottoming IT Order Book | Revenue visibility, hiring stabilization | IT Services, SaaS |
| Robust Credit Growth | Loan book expansion, NIM resilience | Banks, NBFCs |
| Festive Demand Surge | Volume uptick, inventory restocking | Consumer Durables, Retail |
| Global Liquidity Easing | FPI inflows, valuation support | Large Caps, Exporters |
Srivastava also highlighted the macro stability underpinning India’s equity story. With GDP growth projected at 6.5–7%, inflation moderating, and the rupee holding steady, the environment is conducive for corporate performance. “India offers a rare combination of growth and stability. Compared to low single-digit earnings growth in China and mid-single digits in the US and Europe, India stands out,” she said.
The recent reversal in foreign portfolio investment (FPI) flows is another bullish signal. After months of outflows triggered by rising US bond yields, FPIs are returning as the Federal Reserve pivots towards rate cuts. The US 10-year yield has dropped below 4%, improving global risk appetite and supporting emerging market equities.
India vs Global Earnings Growth Outlook (FY26)
| Region | Projected Earnings CAGR | Key Challenges |
|---|---|---|
| India | 15% | Valuation premium, policy risks |
| US | 5–6% | Rate sensitivity, tech saturation |
| Europe | 4–5% | Energy costs, geopolitical tensions |
| China | 2–3% | Property crisis, regulatory overhang |
On the technical front, Srivastava believes the Nifty could breach its previous highs around Diwali, supported by festive consumption and strong domestic flows. “Retail investors continue to invest via SIPs, and DIIs are providing a cushion against global volatility. With earnings upgrades kicking in, we expect a breakout,” she said.
The sectors expected to lead the rally include financials, autos, consumer durables, and select IT names. Srivastava is particularly bullish on banks and NBFCs, citing robust credit demand and improving asset quality. She also sees value in mid-cap IT stocks, which have corrected sharply and now offer attractive entry points.
Sectoral Outlook – H2FY25 and FY26
| Sector | Earnings Momentum | Valuation Comfort | Investment Thesis |
|---|---|---|---|
| Financials | Strong | Reasonable | Credit growth, NIM resilience |
| IT Services | Improving | Attractive | Order book recovery, cost optimization |
| Consumer Durables | Robust | Premium | Festive demand, rural recovery |
| Auto | Accelerating | Mixed | EV adoption, GST tailwinds |
| Pharma | Stable | Moderate | Export recovery, domestic expansion |
Srivastava also cautioned investors to remain selective. “While the broader market is turning, stock picking will be key. Focus on companies with earnings visibility, strong balance sheets, and pricing power,” she advised.
The upgrade cycle is expected to unfold over the next 2–3 quarters, with Q2FY26 likely to show a full recovery in earnings momentum. Analysts believe that the worst of the margin compression is behind, and operating leverage will start to reflect in bottom lines.
Retail investors are advised to stay invested and avoid panic selling during minor corrections. “Use dips to accumulate quality stocks. The long-term story remains intact,” Srivastava said.
With Diwali approaching and sentiment turning positive, India Inc’s upgrade cycle could be the catalyst that propels the Nifty and Sensex to new highs. The combination of macro stability, sectoral tailwinds, and global liquidity makes this a compelling moment for equity investors.
Disclaimer: This article is based on publicly available interviews, market commentary, and financial data. It does not reflect any investment advice or endorsement. All quotes are attributed to public figures as per coverage. The content is intended for editorial and informational purposes only.
