Indian equities continue to navigate a challenging environment, with multiple macro and earnings-related headwinds keeping investors cautious. Despite this, the latest earnings (Q1 FY27) season has provided some comfort, with corporate performance holding up better than expected in several pockets of the market.
Speaking to NDTV Profit, Aman Chowhan, Fund Manager at Abakkus Asset Manager, said Q1 earnings have emerged as a positive surprise for the market, while domestic demand has remained resilient despite the sharp rise in oil prices.
Q1 Earnings A Positive Surprise
Chowhan said the first-quarter earnings season has turned out to be better than expected and has provided a positive surprise for the market.
He also pointed to the resilience of domestic demand, which has continued to hold up despite the surge in oil prices.
Positive On Large NBFCs, Mid-Sized Private Banks
Within financials, Chowhan is positive on large non-banking financial companies (NBFCs) and mid-sized private banks.
He said credit growth is picking up and the non-performing asset (NPA) cycle remains decent.
However, Chowhan believes large banks have limited headroom for further growth, making select NBFCs and mid-sized private lenders more attractive within the financial sector.
Pharma CDMO Gains Sustainable
Chowhan said the gains seen in the pharmaceutical contract development and manufacturing organisation (CDMO) space are sustainable.
The sector remains one of the areas where he sees the recent performance as having a more durable underlying trend.
Chowhan also highlighted the profitability profile of recently listed companies, saying most newly listed companies are profitable.
Export Demand Remains Weak
On the external environment, Chowhan flagged weak export demand as a concern. He also pointed to continuing El Nino fears as another factor that investors need to watch.
Given the combination of these headwinds, he cautioned against extrapolating a broad market view at the current juncture.
Market Outlook: Selective Approach Needed
While the broader market outlook remains difficult to extrapolate, Chowhan's comments point towards a selective approach, with large NBFCs, mid-sized private banks and pharma CDMOs among the areas he remains positive on.
At the same time, resilient domestic demand and better-than-expected Q1 earnings provide some support to the market despite the broader macro uncertainties.
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