Direct Equities: Q4 earnings will guide market amid global uncertainty

Indian equities rebounded strongly in April 2026, with the Nifty rising 7.5% MoM, supported by easing US-Iran tensions, softer crude prices, and currency stabilization. Despite net FII outflows of USD 6.7 bn due to concerns around INR weakness and oil sensitivity, robust DII inflows of USD 5.4 bn supported markets. Globally, Korea, Japan, and Taiwan outperformed, while India lagged MSCI EM by 7.7% in USD terms. Earnings trends remained broadly positive, with financials showing resilience through improving asset quality and stronger FY27 growth visibility, while Consumer and Auto sectors continued to face margin pressures from input cost inflation and weak pricing power. Sectorally, Energy and Commodities benefited from higher crude prices, whereas OMCs and Aviation remained key losers. Industrials and Infra continued to benefit from the capex cycle despite cost pressures, while IT retained its defensive appeal. Overall, management commentary indicates improving confidence in a stronger FY27 growth outlook, supported by expectations of sustained nominal GDP growth in India.

Highlights

• Constructive Market Outlook: Improving earnings momentum and expected FY27E Nifty EPS growth of +16% support a positive market stance despite geopolitical and oil-related risks.
• Valuations & Earnings: Nifty valuations remain near long-term averages, while FY27 earnings growth for Nifty-50/BSE-500 is expected to strengthen significantly versus FY26.
• Mid & Small Caps: Despite the recent rally, the medium-term outlook for mid and small caps remains positive from a 2–3-year perspective.
• Sector View: Prefer Consumer Discretionary, PSUs, and IT; remain selective in Auto, NBFCs, Power, Chemicals, Telecom, and Pharma, while staying cautious on Infra, Realty, Defense, OMCs, and Capital Goods.