Sonam Srivastava, founder of Wright Research, says industrials are a strong case for new investments after Q1FY27 earnings. She cites robust contracted order books in defence procurement, power transmission and grid infrastructure, with clear revenue conversion in the first quarter.
Telecom remains solid thanks to ARPU growth, 5G adoption and domestic pricing power, while pharmaceuticals enjoy steady domestic demand and export gains from currency swings. Srivastava recommends boosting exposure to financials and auto ancillaries, and reducing positions in oil marketing companies and cement where factor scores have weakened after the June quarter.
West Asia tensions near the Strait of Hormuz have pushed crude prices up, raising input costs and cutting forward FY27 EPS estimates, especially for cement, autos, capital goods and chemicals. Despite this, the market shows resilience; Nifty and Sensex profit growth were about 10% and 5% in Q1FY27, while mid‑ and small‑cap stocks performed better due to their domestic focus.
Heavyweights remain sensitive to crude prices, but earnings are compounding across the market, aligning with factor screen signals. Analysts see the index heavyweights improving only in the second half of 2026 and into 2027, with recovery timing delayed and full‑year FY27 growth forecasted at around 14%.
Three factors could trigger a turnaround: stabilised crude prices, favourable base effects from Q3FY27, and renewed foreign capital inflows supported by cooling inflation and possible US rate cuts. The auto sector saw 17% revenue growth YoY in Q1, but profits varied; ancillaries and two‑wheeler OEMs performed well, whereas passenger vehicle OEMs and tyre makers faced higher input costs and price competition.
Ancillaries offer higher pricing power, export and defence revenue, and increased vehicle content, while industrials provide multi‑year revenue visibility through contracted orders. In consumer durables, strong summer volumes, GST cuts and lower borrowing costs boost affordability, but margin pressure from volatile input costs remains a risk.
Festive demand will lift volumes across durables, autos, retail, jewellery and paints, yet higher volumes may not fully offset compressed margins if energy prices stay high. Overall, the focus is on sectors with solid earnings revisions, quality and low volatility: financials, telecom, pharma, and auto ancillaries, while avoiding oil marketing, cement and chemicals.
The strategy involves increasing exposure to financials and auto ancillaries by trimming weaker positions, maintaining a disciplined portfolio aligned with factor model metrics.