- Morgan Stanley is bullish on lenders, consumer, and industrial stocks for the Q2 earnings season
- Q2FY26 is expected to serve as the base for the next phase of India's earnings cycle
- September quarter profit growth is forecasted at low single digits with high single-digit revenue growth
Morgan Stanley remains bullish on lenders, consumer and industrial stocks heading into the earnings season for the September quarter, adding that Q2FY26 will serve as the base for the next leg of the earnings cycle.
In its latest India Strategy note, Morgan Stanley highlighted that although revenue or profit growth is not expected to touch double digits in the September quarter, the road ahead could be brighter.
This is because of a series of stimuli offered by the government and policymakers, including the introduction of GST rate cuts on Sept 22, which has led to early signs of a consumption boom.
The rate cuts issued by the Reserve Bank of India, coupled with income tax cuts, are some of the other measures taken to boost liquidity and consumption in the economy.
Morgan Stanley is expecting low single-digit profit growth for the September quarter as well as high single-digit revenue growth.
The brokerage firm adds that the revenue markers will be distorted by several one-offs.
Breadth in margin expansion to remain low, with only five of the ten sectors expected to see any kind of margin expansion.
Energy and communications space are likely to see margin expansion, while financials may take the biggest margin hit in this quarter.
The note adds that financials and energy witnessed the highest positive earnings revisions in the past three months.
However, Morgan Stanley believes that the September quarter is likely to transition India into a position where it can deliver higher earnings growth, especially in light of the recent policy measures.
Keeping that in mind, the brokerage is betting heavily on lenders, consumption and industrials heading into the earnings season.
Both Nifty Financial Services and Nifty India Manufacturing have considerably outperformed the Nifty benchmark over a year-to-date period, although Nifty FMCG has faced pressure, falling over 3% during the same period.
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