Indian Stocks May Recover on Steady Growth and Earnings Outlook

Earnings Resilience Puts India’s Equity Rebound Case Back in View

A possible recovery hinges on company earnings and domestic growth holding firm as global pressures continue to weigh on sentiment.

A difficult stretch has tested the market’s growth story

The Nifty 50 has fallen about 12% so far in 2026, following 10 consecutive years of gains. Higher oil prices after the US-Israeli war on Iran and record foreign investor outflows of $31.3 billion have added to the pressure. The selling has come as investors favour markets with greater exposure to the artificial-intelligence boom.

That combination matters because it places Indian shares under pressure from forces that do not necessarily reflect the outlook for domestic companies alone. Elevated crude prices, geopolitical tensions and tighter global monetary conditions can unsettle sentiment and complicate the market backdrop. Relekar nevertheless points to India’s sustained growth above 7% and resilient earnings as potential supports for a recovery.

Foreign outflows do not tell the whole story

Relekar cautioned against treating foreign fund withdrawals as a verdict on India’s growth prospects. In his view, flows have also been shaped by crude prices, currency movements and global bond yields. That distinction is relevant for investors: a market can face near-term selling even when the underlying earnings case has not materially weakened.

Domestic investment provides another part of the picture. Relekar said sustained local inflows reflect the longer-term financialisation of household savings, while substantial funds remain in fixed deposits. This may offer support to market demand, but it does not remove the risks from global volatility or guarantee that shares will recover on a particular timetable.

Stock selection and earnings will shape the recovery case

Rather than making a broad market call alone, Relekar’s approach centres on selecting companies. His preferred areas include AI-led capital expenditure, energy, electrification, domestic manufacturing and consumer internet. He also favours private-sector banks and non-bank financial companies, citing attractive valuations and a steady earnings outlook, and expects manufacturing to remain supported by government policy.

The manager’s assessment is that, in some cases, earnings have advanced more than share prices because global factors have held back valuations. He sees the risk-reward balance as better than it was a year earlier, which could help a rebound. That is an investment view, not a certainty: whether prices catch up will depend on earnings delivery and a less disruptive external environment.

Disruption and competition remain important filters

The preferred themes also come with selection risks. Relekar warned against businesses vulnerable to technological disruption and companies facing intense competition from e-commerce platforms. Investors considering the recovery thesis therefore need to distinguish between attractive sectors and individual businesses able to defend their prospects. A market-wide rebound, if it takes hold, would not necessarily lift every company equally.

Key Highlights

• The Nifty 50 is down about 12% so far in 2026 after 10 consecutive years of gains.
• Foreign outflows have reached $31.3 billion, with oil prices and global factors weighing on sentiment.
• Axis AMC’s Sachin Relekar sees resilient earnings and growth above 7% as supports for a possible recovery.
• His preferred areas include financials, manufacturing, energy, electrification and consumer internet.
• Technology disruption and e-commerce competition remain risks in company selection.

Investor Note: The recovery outlook rests on earnings resilience and steady domestic growth, but global pressures remain a material uncertainty. Investors should assess company fundamentals and disruption risks rather than treating a potential market rebound as assured.