We Are Witnessing a Tug-of-War Between Macro and Micro Forces

We should see earnings gather significant momentum in the second half of FY26 DHIRAJ AGARWAL, managing director, Ambit Investment Managers

- Ram Sahgal

Nifty earnings growth, which was a dismal 6% in the previous fiscal year, could gather momentum in the second half of the current fiscal year. This is when the full benefits of the ₹1 trillion cut in personal income tax rate alongside the sharp interest rate cuts by the Reserve Bank of India (RBI) began to spur demand and result in stronger corporate earnings, becoming the next trigger for markets, says Dhiraj Agarwal, managing director (MD), Ambit Investment Managers. He also adds that after the sharp market correction between September and early April, "we've entered a themeless or stock picker's market," a phase that would test the true acumen of finfluencers. Edited excerpts:

The markets have risen 13-14% from 7 April lows, barely 2-3% from their all-time highs. Are earnings the next trigger?

That's the million-dollar question. Right now, we're witnessing a fascinating tug-of-war between the macro and micro forces in the market. The macro picture is very positive and has certainly been the dominant driver, fuelling this impressive rally from the April lows. We had that six-year low inflation print of 2.8%, lower than RBI's comfort zone, which then paved the way for that significant 50-basis-point rate cut. Plus, the ongoing global tariff discussions genuinely present a compelling 'China +1' opportunity for India.

However, 'micro' or earnings growth needs to catch up, both for further upside and even to sustain these current levels. We saw a rather dismal 6% Nifty EPS (earnings per share) growth in FY25. For the market to hold its ground, I believe we need to see that growth accelerate to at least 10% and ideally climb into the 12-14% range for any meaningful upside.

Earnings growth (Nifty 50 and Nifty 500) surprised last quarter, although it was still muted and resulted in downgrades. What's your take on Q1 earnings?