Talking Point This Week: Better Than Feared — India Inc's Earnings Trough Looks Over

The week was characterised by victories and defeats. Bihar marked a remarkable result for the BJP and the NDA, and the Day 1 of the India versus South Africa Test is looking good for India. But India Inc has been a winner too, with results looking better than feared.

Here are the key talking points of this week:

US Markets Have Jitters

Wall Street tumbled and Treasury yields rose on Thursday as expectations of a Federal Reserve interest rate cut next month faded rapidly, while the dollar also fell in a bleak session for most US assets. Bad news for Bitcoin continued as the digital asset continued to sink, diving further below the $100,000 mark thanks to a fresh wave of risk aversion and a selloff in tech stocks. The crypto fell as much as 3.9% to $97,956, intensifying a slump that’s wiped out more than $450 billion in value since early October. One reason could be how a Fed rate cut in December, which was a 90% certainty only a couple of weeks ago according to rates futures markets, is now a coin flip. The rapid shift in market expectations is such that the next fully-priced rate cut isn't until March. Very broadly speaking, a split appears to be forming between Fed governors and regional bank presidents: governors, nominated by the President, are leaning dovish; regional bank presidents, less so.

But - One bear has just turned constructive on US exceptionalism:

"The shutdown of the US government could be nearing an end but its effects will delay the market response to bad news about US inflation and employment, which I had been expecting to be this winter’s dominant story. At the same time, the flow of corporate results which ended last week limits the risk of decisively negative business news until the next quarterly reporting season. As a result, the ban on any bad economic news which President Donald Trump tried to impose by firing the head of the Bureau of Labor Statistics has been achieved by other means—and it is hard to imagine what could disturb the markets’ current confidence about the US economy, at least until early next year"

Source - Anatole Kaletsky

India's Earnings Season Ends Well

Earnings momentum is firming up, with BSE500 PAT growth at 15.5% YoY versus 11.1% in the previous quarter. We think the earnings trough is behind us, with H2FY26 likely to see further acceleration as GST-driven demand cascades through. One can argue that the possibility of the global backdrop turning constructive is high. FPI flows could return here, on earnings traction and Nifty premium compression (more on that below).

In this week, Asian Paints led the paints sector with a robust 47% year-on-year surge in consolidated net profit, bolstered by volume recovery and easing input costs. Tata Steel's consolidated net profit quadrupled, fuelled by higher sales volumes and realisations, though shares dipped marginally on UK operational concerns. Eicher Motors reported a solid 25% profit jump. Voltas faced headwinds, with net profit plummeting 76% on a 10% revenue drop, reflecting seasonal pressures in air conditioning. Retailer Vishal Mega Mart shone brightly, boosting net profit 46% amid improved margins and sales growth. Other notables included Tata Motors swinging to a Rs 867 crore loss in its commercial vehicles unit despite 6% revenue growth, and a broader rally in auto peers like Hero MotoCorp, which posted 15% profit gains. Overall, the earnings painted a mixed canvas of resilience in consumer and metals against pockets of weakness in industrials.

Why Indian Markets Look Interestingly Poised

Indian markets have undergone a long period of underperformance. The MSCI India index has underperformed MSCI EM index by approximately 25% on a rolling one-year basis, which is the steepest gap of underperformance in nearly three decades, as per a note put out by Ikigai. Interestingly, while the indices have been well behaved in some cases, the median drawdown for individual stocks is at over 20% vs BSE 500 index drawdown at less than 5%. Post all of this, there are multiple potential triggers:

• Q2 sets the base for earnings revival in Q3

• GST cut impact, lower interest rates may lead to consumption-spurt based earnings upsides

• Potential trade truce will only aid sentiment

• Potential AI valuation deflation to augur well for markets like India 

Population Issues Of Another Kind

Its not the lone ranger, but China's population decline is a standout story, having declined for three straight years. There are others like Italy, and others which are also in the same boat. In China's case, this has prompted the government to conduct state-sponsored events like collective weddings to promote 'family values'. The government has introduced policies such as cash rewards for families with multiple children to encourage people to have more kids, but the cost of raising a child in China is high, estimated to be over 538,000 yuan to age 18, as per Bloomberg. Incidentally, Elon Musk made a post on his social media platform 'X' drawing attention to Italy's ongoing aging demographic crisis on Thursday. He quote reposted saying "Italy is disappearing" to a post from another user who highlighted how "Italy’s birth rate has dropped to a record low of 1.13 children per woman with only 370,000 babies born last year, the lowest since 1861".

As we wrap, for 'The Big Short' fans, there was a short goodbye from the Big Short. Michael Burry, the 'Big Short' investor who made his fame and fortune betting against the US housing market in the mid-2000s, is closing his hedge fund. In a letter to investors dated Oct. 27, Burry said he would liquidate the funds and return capital, "but for a small audit/tax holdback" by the end of the year. Burry has stepped up criticism of technology heavyweights, including Nvidia and Palantir Technologies, in recent weeks, questioning the cloud infrastructure boom and accusing major providers of using aggressive accounting to inflate profits from their massive hardware investments. Lets see if this turns out to be prophetic.