Aditya Birla Sun Life Expects 12–13% Earnings Growth In FY26

Aditya Birla Sun Life AMC Ltd., the investment management arm of the Aditya Birla Group, expects a double-digit earnings growth in the current financial year despite some challenges in the first quarter.

Earnings growth is expected to "claw back" to around 12% to 13% in FY26. This will be backed by the "fairly positive" liquidity situation and improvement in the rural economy, according to Mahesh Patil, chief investment officer of ABSLAMC.

However, Patil cautioned that the first quarter might face "some challenges" due to global uncertainties, including concerns around trade tariffs. "You might see kind of a slightly weak beginning in this quarter," Patil said in a conversation with NDTV Profit on Thursday.

“After the recent rally, what we are seeing is looking fairly priced now. And I don't see a big near-term upside at this point," he said. "I don't see any major risk for the market to really correct because a lot of those factors which were there...have eased off."

In terms of investment strategy, the top executive said the AMC had been "biased" towards large-cap stocks over the past six to nine months. He cited "valuation comfort" and stability, particularly as these stocks had seen significant selling by foreign institutional investors.

However, he now sees "pockets of opportunity" emerging in the mid-cap and small-cap space following their recent correction.

"We are not focusing so much on broader themes or the sectors. We'll be looking at companies and stocks, which are especially good companies, which have gone through a pain period in the last one year and could recover in the coming quarters… a contrarian play in these sectors and even at the stock level," he underlined. 

Among the sectors Patil is bullish on are banking, consumer discretionary, retail, chemicals and building materials. All of these have underperformed but are showing signs of stabilisation or potential recovery, he said.

While domestic headwinds largely appear to be in the past, he acknowledged some lingering "hesitancy coming in on the global front", particularly regarding the US economy.

A recent US federal court ruling blocking proposed tariffs by the Trump administration has further alleviated fears. He believes the market has largely factored in and recovered from initial tariff concerns.

The CIO highlighted that the downgrade cycle for earnings appeared to have stabilised after the fourth-quarter results, unlike the significant downgrades seen after Q2 and Q3 of FY25. Factors supporting this optimism include the normalisation of government spending, easing monetary conditions and a rebound in rural consumption.

A key factor for the optimism is the anticipated recovery in the rural economy. Patil believes it should perform "much better than what it has been in the last two years". This is supported by predictions of a good monsoon, which has already arrived early, and moderation in inflation.

"Real wages for the rural economy are now in positive territory. So, I think that should help recovery in the coming quarters," he said.