India's catch-up with Asia mkts hinges on earnings delivery: Bharti AXA CIO

Earnings are the biggest lever for Indian markets to close the performance gap with the outperforming Asian peers, said Rahul Bhuskute CIO Bharti AXA

India’s catch-up with the outperforming markets hinges on earnings delivery in the financial  year 2027 (FY27), said Rahul Bhuskute, chief investment officer (CIO) at Bharti AXA Life Insurance, in an email interview with Ananya Chaudhuri. He believes it is premature to talk about earnings recovering from the current double-digit earning per share (EPS) growth amid the ongoing geopolitical tension. Read the edited excerpt:  

 

Given the perceived progress in US-Iran talks, are market participants pricing in an end to the geopolitical uncertainty? Or is the Street view still pessimistic?  

 

It is too early to say market participants have turned optimistic, because we have seen several cycles swing from a deal being "almost done" to "nowhere close."  However, not all participants are pessimistic. Many believe that, as the US-Iran conflict affects every macro factor, India can stage a strong catch-up if the conflict settles. 

 

 

How long could earnings take to recover if crude oil sustains around $100 for the next two quarters? 

 

  We don't think the market is prepared for crude sustaining around $100 per barrel over a long period, and that would be a dire situation. High oil prices would not only entrench inflation, keep monetary policy restrictive, and hit demand, but they would also create significant second-order effects through fiscal pressures. The government budget may get burdened by higher oil and fertiliser subsidies and lower oil-related tax revenues. The government could be forced to cut capex-related spending or widen the deficit. They may also look to aggressively raise disinvestment receipts, but that strategy would have to be executed in much weaker capital markets.  

 

While FY27 EPS growth estimates have reduced since the US-Iran conflict began, they are still in double digits. It is premature to even talk about recovery from that scenario, were it to materialise. 

 

In FY27, what factors can support Indian markets in catching up with emerging-market peers like Japan and South Korea?  

 

Earnings are the biggest lever. A recovery in rural demand, government and private capex, and credit growth could push Nifty earnings back toward mid/high-teens growth, the key re-rating trigger. South Korea outperformed, riding the global AI capex wave, an exposure India's market structurally lacks. India's participation is more indirect.  

 

Finally, flows have to reverse a weaker US dollar, and India's earnings momentum could pull FPIs back, while steady domestic SIP flows provide a floor. With valuations now reset toward their long-term premium, the catch-up ultimately hinges on FY27 earnings delivering. 

 

Which pockets look attractive at current levels? Where have you been deploying cash? 

 

  Private banks offer the best value proposition, followed by pharma and consumer discretionary. We’re also positive on select industrials that should benefit from large-scale investment in areas such as power, data centres, and defence, despite the recent run-up in these stocks.

  

Our approach in this market has been largely bottom-up, focusing on stock-specific factors and backing companies best placed to weather the current volatility, limit margin erosion as raw-material prices rise, and gain market share within their industries. 

 

Do you think precious metals are sufficient to hedge a portfolio amid geopolitical tension?  

 

Precious metals help during geopolitical volatility, but as with everything in markets, one size seldom fits all. This time, they have not been particularly effective hedges against geopolitical risk. In fact, much of the recent rally had already played out before the US-Iran conflict, driven by US dollar weakness, the Federal Reserve’s pivot toward easing, and the ‘politicisation’ of the US central bank. Metals were actually sold off in the early part of the conflict as investors raised cash. Within precious metals, we see gold as a far better geopolitical hedge; silver and palladium are smaller, more volatile, and carry industrial uses that dilute their standing as safe-haven assets. 

 

What key factors are you assessing before taking positions in this market?  

 

Earnings growth is paramount when we decide to add or remove a stock. In any market, we prefer companies with robust fundamentals: strong revenue growth within an attractive industry, a healthy balance sheet, capable management, and reasonable valuations. Now, we are also assessing whether a company's business model can withstand the impact of 

geopolitical stress. 

What are Bharti AXA Life Insurance’s top portfolio allocations across asset classes? 

 

  Every product in Bharti AXA Life Insurance’s suite rigorously adheres to the asset-allocation pattern approved at the time of its launch. For instance, our large-cap ULIP offering invests in companies chosen for their inherent strength from the pool classified as large-cap, the top 100 companies by market capitalisation. Top holdings, therefore, vary from fund to fund, in line with each fund’s target asset allocation. 

 

What are your expectations for the upcoming RBI MPC meeting?  

 

We expect the RBI to maintain a pause on interest rates at the current review. Heightened global uncertainties, primarily the West Asia conflict and an elevated probability of below-normal rainfall, have put both growth and inflation at risk. Inflation has been climbing since last October, and the oil price shock pushed the latest WPI print above expectations.  The depreciating rupee is weighing on the current account deficit and feeding broader inflationary trends.  

 

Given this backdrop, we do not believe the RBI will use rate hikes to defend the rupee at this stage. The central bank may hold rates and retain its neutral stance while being on wait-and-watch mode. 

 

With the average inflation estimated at around 5 per cent for FY27 in our base case, we expect the RBI to begin tightening before long, raising rates by a cumulative 50 basis points before the end of FY27.  ================================ 

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