Harish Krishnan, Co-CIO and Head of Equity at Aditya Birla Sun Life AMC, anticipates a substantial revival in India's corporate earnings in 2026. He attributes this optimistic outlook to several factors: tax cuts, Goods and Services Tax (GST) relief, and the depreciation of the rupee. Krishnan highlighted that a weaker rupee positively impacts Indian companies, as approximately 55-60% of the top 1,000 companies' revenue is dollar-linked, particularly in sectors such as energy, metals, pharma, IT, and auto ancillaries. He projects that a combination of these measures and low inflation will rekindle consumer demand, which constitutes nearly 60% of the Indian economy, thereby boosting topline growth.
While margins have historically driven earnings improvement, Krishnan expects future growth to be fueled by an increase in revenue as consumption strengthens. He noted that even if margins slightly decrease, higher topline growth would be welcomed by markets, which have been concerned about subdued revenues. However, he acknowledged that a significant supply of equity hitting the markets could temper any sharp upside. Krishnan also pointed out that rupee depreciation remains a short-term issue for foreign investors, suggesting that a clear understanding of the rupee's stabilization is crucial for them.
Krishnan emphasized that the next phase of market gains will be driven more by earnings execution than by liquidity, a shift from previous years where liquidity played a dominant role. He identified three key triggers for investors to monitor: corporate earnings, global trade policy/tariff developments, and liquidity conditions (both domestic and global). He highlighted the increasing role of domestic savings in India's markets, which has reduced reliance on foreign capital. Krishnan also warned that market valuations become vulnerable if earnings fail to keep pace with optimistic growth expectations, identifying global inflation and earnings disappointments as key risks for the next 6-12 months.
Aditya Birla Sun Life AMC recently reported a consolidated net profit of ₹309.49 crore for Q1 FY27, a 12% increase year-over-year, with revenue from operations rising to ₹462.96 crore. The company maintained an average Assets Under Management (AUM) of ₹6,279 billion and serviced 11.1 million investor folios. The Board also approved a final dividend of ₹25.50 per share for FY26. These financial results underscore the underlying strength within the AMC, reflecting the broader positive sentiment regarding India's market potential.
Other analysts, such as those from LLama Research, echo a constructive outlook on India's equities, noting that the Nifty is trading at 17.7 times forward earnings, which is below its 10-year average of 18.6 times. They foresee a 15% earnings recovery over FY26-28. This suggests that despite the market's current valuation, there is significant upside potential driven by earnings growth, supported by record domestic institutional buying and relatively low foreign investor positioning.
