Indian earnings recovery takes hold, but monsoon, oil risks cloud outlook, Spark Capital says
- Investors will be seeking evidence that the improvement in earnings can be sustained through fiscal 2028
India’s June-quarter earnings suggest that a recovery in corporate profits is gaining traction in Asia’s third-largest economy, though high oil prices and weak monsoon showers could weigh on the market over the rest of 2026, Spark Capital said.
The benchmark Nifty 50 index has fallen about 8% so far this year, underperforming other Asian and emerging-market indexes.
Shankarraman Ramachandran, managing director and chief investment officer for third-party products at Spark Capital Private Wealth Management, says the recovery was likely to be gradual. Investors will be seeking evidence that the improvement in earnings can be sustained through fiscal 2028.
The Nifty is trading 9% below its all-time peak in December 2025 and has been in what Ramachandran described as a “time correction” since September 2024. Weaker earnings growth, foreign fund outflows - which hit a record $29.3 billion in first half of 2026, according to BofA Securities – trade uncertainty and conflict in the Middle East have offset support from domestic investors and resilient economic growth.
Ramachandran does not expect a market rally in the near term, with the monsoon being the key risk, while sharp swings in crude prices impact the broader markets.
IMF says oil prices, weak monsoon pose biggest risks to India’s FY27 GDP growth
The monsoon is a key driver of India’s economy, underpinning agricultural output, supporting more than 40% of the workforce and influencing both food inflation and rural demand.
Recent earnings and high-frequency data suggest India has absorbed higher crude prices better than initially feared, supported by steep credit growth, power demand and healthy tax collection.
About 2-1/2 weeks into June-quarter results, Nifty earnings growth is tracking at 12% year-on-year, around 3 percentage points above consensus estimates, led by energy, metals and automobile companies, according to BofA Securities.
Spark Capital has been “overweight” on domestic lenders, citing strong credit growth and reasonable valuations, and favours industrials tied to data centres, power equipment and the energy transition.
The wealth manager also sees selective opportunities in healthcare, autos, hospitality and discretionary consumption, but remains cautious on the IT sector due to uncertainty surrounding AI spending and disruption, and on consumer stocks because of concerns that weak rainfall could dampen demand.