Markets Euphoric, Minor Earnings Misses Can Trigger Sharp Volatility

When markets turn euphoric and capital floods in, prices often run ahead of fundamentals Kalpen Parekh Managing director & CEO of DSP Mutual Fund

- Dipti Sharma

Earnings need to pick up, and even a minor disappointment could trigger sharp volatility given that the valuations are still driven by past growth, according to Kalpen Parekh of DSP Mutual Fund.

"As we head into the upcoming earnings season, we believe the easy phase of earnings growth is behind us," said Parekh, managing director and chief executive officer at the company that manages over ₹2 trillion in assets.

Current revenue growth is a modest 4%, and a meaningful pickup will require a recovery in demand as margin-led growth is fading, he said. Valuations reflect past strong earnings growth, but not the recent slowdown to single-digit gains, Parekh said. "Markets are euphoric, where even minor earnings disappointments trigger sharp volatility."

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Do you see the ongoing twists and turns in the India-US trade deal talks as a source of high market volatility in the near term?

The ongoing negotiations and shifting narratives around the India-US trade deal are a vivid reminder that, whether it's tariffs, changing global alliances, or evolving policy frameworks, the landscape will remain volatile. And yes, these twists and turns can, and do, lead to bouts of market volatility in the near term.

That said, volatility is not new for investors. Our role is to not chase headlines or every policy move or market swing; instead, it is to focus on resilient, well-managed businesses.

We see businesses across sectors investing in innovation, expanding their reach, and building robust supply chains, qualities that help them withstand not just trade-related shocks but a wide range of uncertainties. While the noise of global negotiations may cause short-term jitters, the underlying health of Indian businesses and their ability to adapt give us confidence that well-run businesses will continue to create enduring value.

What are your expectations for the upcoming earnings season?