Earnings Outlook for September‑Quarter
Anil Rego, the founder and chief executive of Right Horizons, told Moneycontrol that the positive earnings momentum seen in the first quarter of FY27 is likely to continue into the second quarter. While the overall trend should stay upbeat, he cautioned that performance will differ across sectors.
### Sectors to Watch
Rego highlighted banks and select financials, capital goods, wealth management, hospitals and parts of oil & gas as the strongest performers for the September‑quarter earnings season. Capital‑goods firms should benefit from robust order books and the ongoing capital‑expenditure cycle, whereas wealth managers are buoyed by solid asset growth and healthy net inflows. Hospitals are expected to sustain growth through higher occupancy and added capacity.
Conversely, consumer staples (FMCG) may face headwinds from higher input costs, and information technology could see mixed results, with smaller tier‑2 players potentially outperforming larger peers amid a still‑soft global demand environment.
RBI’s Policy Shift
Rego said the Reserve Bank of India’s recent policy decision was largely in line with expectations. The central bank raised the repo rate to 5.50% and moved from a neutral stance to what it described as *calibrated tightening*.
> “The increase in the repo rate to 5.50 percent, coupled with the change in stance from neutral to calibrated tightening, signals that the RBI is becoming more focused on preventing the recent supply‑side inflation shock from becoming broader and more persistent.”
The RBI’s FY27 CPI inflation projection has been revised to 5.2%, with food‑price pressures becoming more widespread. Wholesale inflation was already close to double‑digit levels before the policy change, underscoring the need for action.
At the same time, the RBI lifted its FY27 GDP growth forecast to 7.1%, giving the central bank a cushion to tackle inflation without risking a sharp slowdown.
### Future Rate Moves
Rego noted that the RBI has not committed to a predetermined path of hikes. The bank’s stance now allows it to weigh a further 25‑bps increase against a pause, depending on incoming data. If crude oil remains high, food inflation persists, or second‑round price pressures become visible, another hike could be considered. The RBI may also use liquidity management and macro‑prudential tools alongside the policy rate.
Market‑Wide Implications
The interview suggests that concerns over elevated crude oil prices and higher U.S. bond yields are partially priced into the market, as reflected in recent volatility. The key uncertainty lies in how long these pressures will last.
If oil prices stay elevated, inflation could rise, corporate profitability could be squeezed, and the current‑account deficit could widen. Persistently high U.S. yields could keep global liquidity tight, support the dollar, and temper foreign portfolio flows into India.
For equities, this environment may limit valuation expansion in the near term, making earnings delivery increasingly important.
What to Watch Next
- **RBI’s next policy meeting**: A second 25‑bps hike remains a possibility if inflationary pressures persist. - **Oil price trajectory**: Any sustained rise could feed into broader inflation and affect corporate margins. - **Geopolitical developments**: The West‑Asia conflict and its impact on crude prices will continue to influence inflation expectations. - **Sector earnings reports**: The performance of banks, capital goods and wealth managers will be a key barometer for the broader market.
Rego’s outlook paints a picture of cautious optimism: earnings should stay healthy, but investors should remain alert to macro‑economic signals that could prompt further tightening.
Bottom Line
Right Horizons’ CEO sees a continuation of the Q1FY27 earnings upswing into Q2, with certain sectors poised to lead. The RBI’s recent rate hike and shift to calibrated tightening reflect a hawkish stance aimed at curbing inflation without stalling growth. Market participants should keep an eye on oil prices, U.S. yields, and the RBI’s forthcoming decisions as the fiscal year progresses.