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Informist, Wednesday, Dec. 3, 2025

 

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--Kotak MF:Earnings seen drawing foreign investors, supporting mkt liquidity 
--CONTEXT: Kotak MF's comments on market outlook for 2026 
--Kotak MF: FY27 corporate earnings growth seen in double digits 
--Kotak MF: Mid-cap stocks expected to outperform large-, small-caps 
--Kotak MF: Investors are advised to moderate expectations of mkt returns 
--Kotak MF: Narrower gap in credit-deposit growth could ease margin pressure 
--Kotak MF: Credit growth picking up, indicates better lending activity 
--Kotak MF: Global interest rate cuts in 2026 will be lower than in 2025 
--Kotak MF:Prospect of India entering Bloomberg Global Aggregate Index strong 
--Kotak MF: US tariffs likely to be passed on to US customers 
--Kotak MF: Cos' margins are near all-time high but capex not picking up 
--Kotak MF: India is lacking in R&D investments 
--Kotak MF: India share of global GDP seen 9.2% in 2025-30 vs 7.8% in 2021-24 
--Kotak MF: Valuation of Indian market looks better than China 
--Kotak MF: Corporate earnings growth expected to rebound in H2 
--Kotak MF: Positive on banking, financial services sector for 2026 
--Kotak MF: India among lowest-penetrated 2-wheeler markets in Asia 
--Kotak MF: Expect RBI to ease key interest rate by 25 bps during Dec-Mar 
--Kotak MF: RBI likely to do OMOs of INR 1.5 tln-INR 2 tln during Jan-Mar 
--Kotak MF: FY27 fiscal deficit seen around 4.5% 
--Kotak MF: US Fed expected to cut rates more than RBI in 2026 
--Kotak MF: Expect FPIs to turn buyers in 2026 
--Kotak MF: Expect uptick in execution, orderbook of defence cos 
--Kotak MF: Destiny of rupee is to depreciate 

 

MUMBAI – Corporate earnings are expected to grow in double digits in 2026–27 (Apr-Mar), which is likely to attract foreign portfolio investors and support market liquidity, Nilesh Shah, managing director of Kotak Mahindra Asset Management Co., said Wednesday. "Investors are advised to moderate return expectations and adopt a balanced, diversified approach across asset classes to navigate evolving market dynamics," he said at the mutual fund house's annual outlook for 2026. He added that shares of mid-cap companies are expected to outperform large- and small-cap companies, though by a narrow margin. 

 

After muted growth in the past several quarters, corporate earnings are expected to rebound in the second half of FY26, supported by sustained economic growth and the GST cuts, Harsha Upadhyaya, chief investment officer at Kotak AMC, said at the event here. Valuation of the Indian market looks better than that of China and the volatility has eased. "...there will be more and more positiveness on Indian equities from a global investor perspective as well." 

 

The Nifty 50 index is trading close to the long-term average of 20.8 times the earnings-per-share. The Nifty Smallcap 100 index is 25.1 times price to earnings, which is at a significant premium compared to its long-term average of 16.7 times the PE, the asset management company's fund house said. The Nifty Midcap 100 is at 29.2 times the PE, which is also higher than the long-period average of 23.1 times. 

   

The aggregate net profit of companies which are part of the Nifty 50 is expected to grow 11% on year in the second half of the current financial year, the fund house said, adding that the recovery will continue in FY27, too. The earnings growth will be led by sectors such as consumer, banks, and cyclicals, it added. 

 

The fund house is positive about the banking and financial services sector for 2026 due to improving lending activity. The narrowing gap between credit and deposit growth could ease margin pressures, supporting profitability, Shah said. Banks and financial services stocks together have the highest weightage--almost 37%--in the Nifty 50. 

 

When it comes to the automobile space, India is among the lowest-penetrated two-wheeler markets in Asia, Upadhyaya said. "I think the low penetration levels will augur well for further sustained growth in automobile segment. And the recent cut that we have seen in GST rates is again a positive for this segment as well," he said. 

 

The mutual fund entity also expects foreign portfolio investors to be buyers in the equity market in calendar year 2026 as earnings start to pick up and valuations improve, particularly when compared to that of China, Shibani Sircar Kurian, senior fund manager and head of equity research at Kotak Mutual Fund, said. Foreign investors have aggressively offloaded domestic equities since the end of September last year. 

 

Talking about capital expenditure trends, Shah said spending of private players is still not gaining momentum even though margins of these entities are at all-time highs. India is lacking investments in research and development, and private research and development is significantly behind, he said. Investment in research and development will keep "our growth rate at high level," he added. 

 

Kotak Mutual Fund expects lesser global interest rate cuts in 2026 compared to 2025. The US Federal Reserve is expected to reduce rates more than the Reserve Bank of India in the next calendar year and the RBI is likely to cut rates by 25 basis points between December and March. The RBI is scheduled to announce its monetary policy decision Friday and the US Fed's policy outcome is due next week. The fund house also said the RBI is expected to make open market operation purchases of INR 1.5 trillion-INR 2 trillion during the March quarter. 

 

Commenting about tariffs, Kotak Mutual Fund said that US levies are likely to be passed on to customers in the US. "Preliminary estimates suggest that more than half of tariff costs have been absorbed by US businesses...But, this share may decline to 8% over the next several months as consumers and foreign exporters gradually absorb more of the cost," the fund house said in its presentation. US tariffs had hit domestic sectors such as textiles, aquaculture, gems and jewellery, and handicraft due to high dependence on labour and narrow profit margins, it said. 

 

On India's economic growth, Kotak Mutual Fund said the country's share of global GDP is expected to rise to 9.2% during 2025-2030 from 7.8% in 2021-2024. The prospects of India entering the Bloomberg Global Aggregate index have strengthened, which will give the country's bond market a strong push. India's fiscal deficit is expected to fall to 4.4% of GDP in FY26 and to around 4.5% in FY27 from 5.6% in FY24. 

 

Speaking about the domestic currency, the fund house said India needs to leverage the depreciation of the rupee for exports. The currency has depreciated 5-16% in the past 11 months compared to other foreign currencies, it said. The destiny of rupee is to depreciate, Shah said. On Wednesday, the rupee crossed 90 against the dollar and closed at 90.1900 against the dollar.  End

 

Reported by J. Navya Sruthi and Anjana Therese Antony

Edited by Deepshikha Bhardwaj

 

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