‘Rise in earnings can bring FIIs back, elevate India’s global standing’

It’s still early, but if earnings turn around, much of the global underperformance over the past year could well be reversed, believes Trideep Bhattacharya, president and C1O-Equities, Edelweiss MF.

- DiptiSharma [e-mail]

“Currently, India isn’t a favourite among EMs (emerging markets) due to weak earnings, but once that reverses, Fll (foreign institutional investor) sentiment should improve over the next 12 months,” he said.

Encouragingly, recent management commentaries and September-quarter earnings suggest we could finally see 1-2% earnings upgrades after nearly 18 months of stagnation, said Bhattacharya, who manages domestic equity funds worth ₹31,092 crore.

He's been underweight on IT for quite some time, but now has a neutral stance, which is “a contrarian call”, and he hopes Edelweiss MF can “capture the potential upside in the sector” as earnings seem to be bottoming out, and the 12-month outlook looks more constructive.

India has been among the worst-performing markets lately. So, beyond earnings growth, is there any other potential driver?

Over the past 12 months, India has faced three major headwinds. First, an earnings downgrade cycle has been underway since June-July last year, resulting in a 12-13% erosion. Second, despite early optimism around Indo-US ties under (US President Donald) Trump, higher tariffs have become a macro drag, weighing on valuations. Third, India is viewed as an “anti-Al” trade, unlike North Asian markets as Al (artificial intelligence) plays, hurting its appeal among Fils.

If earnings turn around, much of the global underperformance over the past year could well be reversed.

We've seen valuations stay quite expensive, and despite a year of underperformance, we're already nearing fresh highs again. How do you see this playing out? If we hit new highs, won't that make us even more expensive?