Dear Investors,
We at Veritas Research and Advisors (applied for a Research Analyst License with SEBI) are excited to share our 2nd news letter for the quarter ended Sep ’25. We hope to add some valuable insights.
Some Structural Reforms and the Global Developments:
During Q2FY26, the global and domestic landscape witnessed a mix of challenges, reforms, and key developments. The United States imposed steep additional tariffs of 50% on Seafood, Textile etc. and 100% on branded generic pharmaceuticals, slowing growth across the sector. Further, the White House raised the H1-B visa fee to $100,000 (lifetime)—a sharp jump from the earlier $2,000–$5,000 range—making it significantly more expensive to hire foreign professionals.
- As a result, India’s position in the Emerging Markets ranking slipped to 2nd place, while a relatively stable Chinese economy reclaimed the top spot.
- Despite these headwinds, the Indian government introduced major structural reforms aimed at boosting consumption, including GST rate cuts on several essential goods to 5% and 12%, effective September 2025 onward.
- The festive season further lifted sentiment—Navratri witnessed record-breaking bookings in passenger vehicles and strong traction in online festive sales. Adding to the optimism, India’s real GDP growth for Q1FY26 came in at 7.8%, comfortably beating the RBI’s estimate of 6.5%, underscoring the economy’s resilience amid global challenges.
Q2FY26 Corporate Snapshots and Market Updates:
- On the corporate front, the government took a bold step by banning all “Online Real Money Games (RMGs)”, a segment that had reportedly drained the lifelong savings of many Indian families.
- Year-to-date (YTD) 2025, for the first nine months, the India EM Index declined -1.23%, significantly underperforming global peers such as the MSCI EM (+19%), Hang Seng (+28%), and DAX (+19%). This underperformance was largely driven by the U.S. tariff escalation, stretched valuations, and persistent foreign portfolio investor (FPI) outflows.
- In terms of earnings, Nifty50 EPS growth stood at 7.4% during Q2FY26—its slowest pace in over four years. Despite the moderation in earnings, the Nifty50 P/E multiple remains elevated at 21.7x, which is above pre-pandemic levels, though slightly below the 1-year and 5-year averages of 22.9x and 23.9x, respectively.
- As a result, Nifty50, Midcap, and Smallcap indices delivered absolute returns of -4%, -4%, and -5%, respectively.
Veritas Research View and Outlook:
With a long-term perspective, we believe patience and persistence are key to navigating volatility and reaping future gains. Despite external headwinds, a strong monsoon, monetary easing, and the 2025 GST rate cuts have supported inflation control and boosted consumption. The new structural reforms in GST and personal taxation are expected to further drive demand in the upcoming festive and wedding season. Additionally, bank credit growth is likely to accelerate to mid–double-digit levels in H2FY26.
In the near to medium term, markets are expected to stay constructive, supported by macro reforms and resilient domestic demand. While the H1-B visa fee hike and global tech spending slowdown may keep IT sector earnings subdued, the long-term outlook remains positive. The rural economy continues to outperform, urban recovery is gaining traction, and India’s sovereign rating upgrade by S&P (BBB from BBB-) could attract fresh FPI/FII inflows, reversing recent outflows.
At Veritas, we remain constructive on valuations and expect earnings momentum to strengthen in H2FY26, supported by festive demand, policy tailwinds, and improving macro fundamentals. We expect Nifty EPS growth of 11–13% CAGR over FY25–27E, with valuations at 18.7x FY27E EPS, and maintain a positive outlook on consumption, lending, consumer discretionary, CDMO, and manufacturing sectors.
Happy Investing,
Veritas Research and Advisors