India's Earnings Strong Amid Global Economic Turbulence, Says Deepak Shenoy
Quick Look
- Despite global economic turbulence, India's company earnings are performing well, with median earnings growth in the Nifty 500 at 18-19%.
- Deepak Shenoy advises investors to focus on fundamentals, maintain patience, and consider a five-year outlook for market entry points.
AI-generated summary
Why It Matters
Global economic turbulence, including oil price spikes and rising bond yields, is creating uncertainty. India's corporate earnings, however, have shown resilience, exceeding expectations in the March quarter.
Global economic turbulence is high. However, India's company earnings are performing well. Deepak Shenoy advises investors to focus on fundamentals and maintain patience. Disciplined investing is key for retail investors. The market presents entry points for those with a five-year outlook. India needs to build domestic manufacturing to reduce dollar dependency.
With oil spiking, bond yields surging globally, and the rupee under pressure, Deepak Shenoy says the macro noise is beyond anyone's control, but India's earnings story remains quietly strong.
Market outlook
In a market where geopolitical crosswinds, from oil supply shocks to an inconclusive Xi-Trump summit, are dominating sentiment, Deepak Shenoy, Founder and CEO of Capitalmind MF, urges investors to tune out the noise and focus on fundamentals with a longer time horizon.
"Disciplined investing for retail investors is always useful. Do not try to time it too much," Shenoy told ET Now. He warns that current price action offers no clear signal, neither a breakdown nor a breakout, making tactical positioning treacherous for most investors.
"This market requires patience. If you do not have that patience, a fixed deposit or a liquid fund will probably be a better option."
Earnings beat expectations
Despite the macro turbulence, India Inc.'s March quarter results came in well ahead of forecasts. Median earnings growth in the Nifty 500 clocked in at 18–19%, with smallcaps posting around 20% growth. Balance sheets remain resilient, and corporate India has the debt headroom to expand capex if policy support follows.
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Shenoy sees industrial and public sector bank stocks as pockets of value, though he notes the PSB rally may have peaked for now. He cautions that while some sectors are undervalued due to unrecognised growth, others are overpriced on assumptions that cyclical earnings will persist.
The bond tax problem
On the proposed reduction in taxation for FIIs investing in Indian bonds, Shenoy is cautiously optimistic but tempers expectations. India remains an outlier globally by charging capital gains tax on bond sales to foreign residents, and TDS rules can effectively double-tax investors in the secondary market.
The bigger issue, he argues, is policy consistency. Frequent flip-flops, from Mauritius tax changes to retrospective capital gains levies, have made foreign investors wary of committing to India's bond market for the long haul. "If we had a 10-year trajectory and kept it, that would help," he says. Any relief measure, therefore, needs to be accompanied by a credible long-term policy commitment to have a meaningful impact on FII flows.
Bottom line for investors
Shenoy's prescription is simple: if you have a five-year time frame and the stomach for volatility, the market offers reasonable entry points. If not, capital preservation instruments are a wiser choice. The macro will play out; India just needs to exercise patience, and start building the domestic manufacturing muscle to reduce its vulnerability to dollar swings.
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What to Watch
AI outlook — possibilities, not facts
Indian equities will offer reasonable entry points for investors with a five-year time frame and tolerance for volatility.
Likely · Medium term
Relief measures for bond taxation will be accompanied by a credible long-term policy commitment to impact FII flows.
Possible · Medium term
Open Questions
- Will policy consistency improve to attract long-term FII investment in Indian bonds?
- Can India effectively build domestic manufacturing to reduce dollar dependency?
- What specific policy support will follow to encourage corporate capex expansion?
- Will the current market entry points offer sustained returns for investors with a five-year outlook?
