Over the past 8-9 months, equity markets have gone through a sharp correction phase, with the broader markets declining by over 30%. While the reasons behind this correction are widely known and debated, what stood out during this period was the divergence beneath the surface.
As portfolios saw consistent drawdowns, a set of high-quality franchises quietly delivered strong earnings growth—largely unnoticed. This phase reinforces a timeless investing lesson: when noise dominates, fundamentals matter even more. Companies with limited exposure to global conflicts or those driven by domestic demand continued to perform steadily.
It echoes a classic principle often attributed to Warren Buffett; “Be fearful when others are greedy, and greedy when others are fearful.” Periods like these reward patience, discipline, and conviction.
April Recovery: Relief Rally or Structural Turn?
April brought a notable shift in sentiment, with markets staging a meaningful recovery:
- Nifty: +6%
- Midcap: +12%
- Smallcap: +14%
The rally was largely driven by optimism following a temporary ceasefire announcement led by the U.S., which eased geopolitical concerns. However, uncertainty still lingers. The situation remains fluid, particularly around the Strait of Hormuz, a critical global trade route that handles nearly 20% of the world’s crude oil transportation.
This keeps global markets on edge, with volatility likely to persist depending on how geopolitical developments unfold.
India’s Consumption Story: The Bright Spot
Amid global uncertainty, India continues to stand out with strong domestic momentum.
- Consumption growth: ~26% in FY26, supported by GST rationalisation
- Auto sector: Reported strong double-digit growth in April
- FMCG & Retail: Delivered better-than-expected Q4FY26 results
Large FMCG players such as Hindustan Unilever (HUL), Nestlé India, or among others reported healthy volume growth ranging between 5% to 20%, signaling demand resilience.
This reinforces a key theme:
India’s domestic consumption engine remains robust, even as global demand cycles remain uncertain.
Global vs India: A Valuation Perspective
India continues to trade at a premium compared to other Asian markets. Despite relatively moderate earnings growth versus peers, India Inc is valued at ~20x, reflecting strong structural confidence. As shown in the table below, valuations remain a key point of debate.
| Market | Earnings Growth | Valuation (P/E) |
|---|---|---|
| Korea | ~150% | ~7x |
| Taiwan | ~35% | ~18x |
| China | ~13% | ~12x |
| Brazil | Commodity-led | Attractive |
| India | ~8.5% | ~20x |
Additionally, FII flows may remain volatile or negative, particularly if geopolitical tensions (such as the Iran situation) stabilize or shift global capital preferences.
Earnings Season So Far: Mixed Signals
The ongoing Q4FY26 earnings season has delivered a mixed picture:
Large Caps (Nifty)
- Revenue growth: 10-12% YoY
- Operating profit: 8-10% YoY
- PAT growth: 5-7% YoY
- Margins impacted by rising input costs
Midcaps
- Revenue growth: 10-13% YoY
- Operating profit: 12-16% YoY
- PAT growth: 10-15% YoY
Small Caps
- Revenue: 11-14% YoY
- EBITDA: 15-20% YoY
- PAT: 12-18% YoY
While large caps saw margin pressure due to higher raw material costs, mid and small caps outperformed, supported by operating leverage and a favorable base effect.
Closing Thoughts: Staying Grounded in Fundamentals
The past few months have once again highlighted that markets often move in extremes—both on the upside and downside. While global uncertainties continue to create volatility, India’s domestic growth story remains firmly intact.
The key takeaway from this phase:
- Focus on fundamentals, not noise
- Look beyond short-term market movements
- Identify businesses with resilient earnings drivers
As the market navigates through geopolitical uncertainties and valuation debates, disciplined investing will continue to differentiate outcomes.
Warm Regards,
Veritas Research and Advisors
Note:
Source: Veritas Research and Media Article
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