Corporate earnings may see low double-digit growth in FY27: Alok Singh

Global uncertainties remain the biggest driver of market sentiment despite healthy domestic indicators, says Bank of India Mutual Fund CIO Alok Singh

Even as high-frequency economic indicators continue to point to healthy economic activity and improving corporate earnings, global uncertainties remain the biggest factor for market sentiment, says Alok Singh, chief investment officer (CIO), Bank of India Mutual Fund. In an email interview with Abhishek Kumar, he adds that an adverse monsoon, slowdown in global growth, currency volatility and monetary policy shifts across major economies are also key downside risks for Indian equities. Edited excerpts:

 

The equity market has remained range-bound in recent weeks. What's holding back the next leg of the rally — persistent global uncertainties, or valuations and earnings growth expectations offering limited room for upside?

 

As geopolitical tensions eased in April, markets recovered from their lows and shifted their focus back to earnings growth and domestic fundamentals.

 

However, renewed tensions in West Asia have once again weighed on sentiment, leaving equities largely range-bound in recent weeks.

 

For India, crude oil prices remain critical for macroeconomic stability, making developments in West Asia a key driver of investor sentiment.

 

While high-frequency economic indicators continue to point to healthy economic activity and improving earnings, global uncertainties are currently exerting a greater influence on market direction. Until geopolitical risks ease decisively, the market's ability to sustain the next leg of the rally is likely to remain constrained.

 

What factors are likely to drive equity markets in the coming months?

 

The trajectory of earnings growth will remain the key determinant of market performance. In addition, progress on government-led capital expenditure, private investment activity, and the pace of global economic growth will be important factors to monitor. Geopolitical developments, particularly in West Asia, and movements in crude oil prices will continue to influence market sentiment and could create intermittent volatility.

 

Which sectors are best positioned to do well, going forward? Are there any sectors where you remain cautious?

 

Among the larger sectors, we believe financials are well positioned given their attractive valuations, healthy balance sheets, and earnings growth prospects. Credit growth remains supportive, while asset quality across the banking system continues to be robust. We also remain positive on automobiles, as rising discretionary spending and improving consumption trends are likely to support demand.

 

Infrastructure-related sectors continue to benefit from sustained government policy support and ongoing capital expenditure initiatives. Additionally, we remain constructive on the electronics manufacturing services (EMS) segment, driven by manufacturing incentives, supply-chain diversification, and growing domestic production opportunities.

 

On the other hand, we remain relatively cautious on the energy sector due to crude price volatility and evolving global dynamics. We are also cautious on IT, where long-term business visibility remains clouded by the evolving impact of artificial intelligence (AI) and changing technology spending patterns.

 

Have the June-quarter earnings released so far met your expectations, and which sectors have stood out? Do you expect FY27 earnings growth to reach double digits?

 

Overall, the June-quarter (Q1 of FY27) earnings season has been better than expected so far. Among the sectors that have stood out, public sector banks, capital goods, and capital market-linked businesses have delivered strong operational and earnings performance.

 

Looking ahead, we expect earnings momentum to remain healthy through the second half of the financial year, supported by improving domestic demand, government capex, and favourable macroeconomic conditions. This should enable corporate earnings to deliver low double-digit growth in FY27.

 

But downside risks remain. Any significant escalation in West Asia tensions, leading to sustained higher energy prices, or a weaker-than-expected monsoon could put pressure on earnings growth expectations and lead to downward revisions.

 

What are the key risks that equity markets face at this juncture?

 

The primary risks facing Indian equity markets currently are external in nature. Any escalation in geopolitical tensions could lead to higher crude oil prices, affecting inflation, fiscal balances, and corporate margins.

 

In addition, an adverse monsoon outcome could impact rural demand, agricultural output, and inflation trends, thereby affecting earnings growth expectations. Risks of a global economic slowdown, currency volatility, and unexpected shifts in monetary policy across major economies also remain important factors that investors should monitor closely.

 

Broader markets have significantly outperformed since April. Do you expect this trend to continue?

 

The recent outperformance of mid and smallcap stocks reflects investor expectations of relatively stronger earnings growth in these segments compared with many largecap sectors, where earnings momentum has moderated. Markets typically reward areas where earnings growth is expected to accelerate, and the broader market has benefited from this dynamic.

 

Going forward, the sustainability of this trend will largely depend on whether companies are able to deliver on these growth expectations.

 

We expect market performance across segments to remain closely linked to earnings outcomes, with stock and sector selection becoming increasingly important at current valuations.

 

The June-quarter earnings of several IT companies have been positively received by the market. Do you believe the sector has turned a corner?

 

The June-quarter results from IT companies were largely in line with, or marginally better than, Street expectations. While this has improved near-term sentiment, we believe the key challenge for the sector is not cyclical but structural in nature. The rapid evolution of AI is reshaping technology spending patterns, service delivery models, and the long-term economics of the business. While AI presents significant opportunities, it also creates uncertainty around future revenue streams.