Nomura's India equity research team, led by Saion Mukherjee, projects a strong recovery in Indian corporate earnings growth for 2026, forecasting a return to low double-digit expansion after a period of moderation. The revival is expected to be driven by a cyclical upturn in commodity sectors and supportive macroeconomic policies.
Key Drivers of the Earnings Rebound:
- Low Base Effect: Provides a favorable comparative period.
- Cyclical Recovery in Commodities: Sectors like chemicals, oil & gas, cement, and metals are anticipated to lead the earnings recovery.
- Supportive Policy Environment: Policies focused on domestic growth and self-reliance (e.g., Production Linked Incentive schemes, infrastructure spending) are expected to sustain demand.
- Benign Macro Backdrop: Calmer geopolitics and stable macros are seen limiting downside risks to earnings estimates.
Foreign Investor Sentiment: A Potential Turnaround
The report notes that strong domestic flows and high valuations have crowded out Foreign Institutional Investors (FIIs) recently. However, Mukherjee suggests FII inflows could improve marginally in 2026 if earnings delivery matches expectations and valuation concerns ease.
Preferred Sectors:
Nomura maintains a bullish stance on sectors aligned with domestic recovery, manufacturing, and select exporters:
- Financials
- Pharmaceuticals
- IT Services
- Consumer Discretionary
- Real Estate
- Manufacturing
Market Context and Implications:
This outlook comes at a time when Indian markets are trading near record highs, with valuations demanding robust earnings delivery to justify further upside. Nomura's call suggests that after a phase of margin compression and uneven growth, a broad-based cyclical recovery could provide the next leg of fundamental support for equities.
Bottom Line:
Nomura’s forecast paints an optimistic picture for Indian corporates in 2026, hinging on a cyclical uplift in commodity profits and sustained domestic policy support. If realized, this earnings rebound could help absorb rich market valuations and potentially attract renewed foreign capital. Investors are likely to watch early 2026 earnings cues closely, particularly from the identified cyclical sectors, to validate this constructive outlook.