There is optimism over earnings; only banks have disappointed: Nitin Bhasin

Time of India

29-05-2025

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, Head-Institutional Equities,, says the banking sector has underperformed expectations, even excluding IndusInd Bank , with earnings lagging behind other sectors. Positive surprises were observed elsewhere in the Nifty largecaps . Anticipated rate cuts of around 50 bps next year are expected to further pressure bank earnings, which are projected to contribute significantly to overall earnings growth.Yes, traveling across the world and meeting some global think tank people, you come back to India where markets are hitting back to 25,000; clearly good days are over here. What keeps me excited about the markets is earnings estimates, the earnings for the quarter, and the earning season gone by where the banks disappointed. Apart from banks, most of the earnings have thrown up positive rather than negative surprises. That shows there is optimism over earnings. The only thing is does it lead to FY26 earnings estimates for the whole market move up?The last time when I was speaking to a few investors, we highlighted that for the whole year as such, the earnings growth will be closer to 10-11%. That is the only thing whether this quarter earnings growth surprises leads to the next year. The second good thing happening in India is the FII flows and what we can see is large amounts of sell downs by many key important and good quality companies getting lapped up by the market. That shows there is enough capacity or appetite in the world to buy into good quality Indian companies, whether it is Bharti or a company like an ITC.Right now, there is enough capacity and that shows the appetite for the Indian stocks is there. Also RBI dividend clearly gives a lot of fiscal room to the government in the year to come.The way I look at it is that banks are one sector where we find the disappointments in the banking sector. We were expecting the bank sector to lead. However, even if we were to do ex IndusInd Bank, banks have been lacklustre. Most of the other sectors, perhaps some of the names like as you mentioned a while back, the Adani stocks because of one-off or Bharti, have held up really well in terms of earnings.So, for us, it was more of positive surprises and within the Nifty or the largecaps, it was the banks which perhaps had a more lacklustre numbers. Given that next year there will be more rate cuts – closer to about 50 bps rate cut, the bank's earnings pressure is more next year which are supposed to contribute to anything between 40% and 45% of the earnings growth next year, We got a little bit negatively surprised in banks.