ET NOW EXCLUSIVE: With the Reserve Bank of India’s (RBI) latest policy measures aimed at boosting the country’s foreign exchange reserves as well as overseas capital inflows, a key question is hogging the limelight. Can India’s markets see a major turnaround?
In an interaction with ET NOW, Manish Sonthalia of Emkay Investment Managers breaks down the impact of oil prices, rupee movement, FII flows and earnings outlook.
He also revealed the biggest long-term themes: AI, energy transition, defence and advanced manufacturing, shaping India’s next growth cycle.
Will India’s market story see a turnaround?
“I think markets are decisively on the positive side because we have got a breathing space for the next three months till September 30, 2026, whereby we will likely receive $40 -$50 billion and that would be a great helping hand in terms of deciding the sentiment of the market and in in terms of absorption of the selling pressure that’s coming from the FII. Everything else is basically positive from the fourth quarter earnings point of view,” said Manish Sonthalia of Emkay Investment Managers.
Ongoing West Asia crisis to impact on earnings?
“First quarter numbers are going to be damaged when compared to the fourth quarter of last year. If we have a resolution anytime between now and September 30, then the first quarter numbers could be likely seen as a one-off because all hinges on collapsing of the oil prices. That is the main source of inflation apart from the very weak monsoon,” Sonthalia added.
Do you see Indian companies being agile and quick to transition themselves to manage change with respect to what AI is bringing in?
“So large companies will be slightly more headwinded because training of such a large workforce is going to be challenging but midcap IT companies should be able to transition those who are having a lesser workforce. The learning curve is going to be there but it’s easier for midcap small cap companies to transition as opposed to large cap companies,” Sonthalia said.
India’s historic earnings performance in FY26
India delivered a historic earnings performance in FY26, with the profit-to-GDP ratio of Nifty 500 companies rising to an all-time high of 5.2 per cent, according to Motilal Oswal’s latest “India Strategy” report. The profit-to-GDP ratio of listed Indian companies also climbed to 5.7 per cent, marking its highest level in the last 18 years.
Despite geopolitical tensions, global uncertainty, and a moderation in domestic demand, corporate earnings reached record levels. Auto, Oil & Gas, and Metals emerged as the biggest contributors to this growth, playing a key role in shaping India’s earnings story.
The automobile sector made the largest contribution to the Nifty 500’s profit-to-GDP ratio, with its share increasing from 0.3 per cent to 0.5 per cent.
Sector profits surged from Rs 1,070 billion in FY25 to Rs 1,813 billion in FY26, reflecting a 69 per cent increase. Strong demand for passenger vehicles, higher premium vehicle sales, and improving export markets supported this growth.
The Oil & Gas sector recorded the second-biggest contribution to corporate earnings growth. Its profit-to-GDP contribution increased from 0.5 per cent to 0.7 per cent.
Total sector profits rose from Rs 1,678 billion in FY25 to Rs 2,362 billion in FY26, representing a 41 per cent year-on-year increase.
Over the last four years, Nifty 500 profits have nearly doubled from Rs 9.8 lakh crore to Rs 18.1 lakh crore, while corporate profits expanded at a CAGR of 28.7 per cent during 2020-26, compared with GDP growth of 9.5 per cent.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
