He noted that markets had initially pencilled in 13–15% earnings growth for FY27, but this is now likely to moderate to around 6–7%.
He also cautioned that if the current environment worsens, markets could even begin to factor in near-zero earnings growth, which would imply further downside risks to valuations.
Badshah projected a further downside of 7-8% for the Nifty and up to 10% for the broader market before a potential bottom is found.
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On the timing of the earnings impact, Badshah does not anticipate a major hit in the March quarter results. However, he expects the June quarter to be the first to reflect the pressure, especially if energy prices remain elevated. A “full-blown impact,” he concluded, would likely be more visible in the second part of the calendar year 2026.
Commenting on the information technology (IT) sector, Badshah expressed an incrementally constructive view, noting its recent relative outperformance after a significant battering. He highlighted that Invesco had started looking at the sector from a value standpoint even during its recent AI-related meltdown.
“This is one of the sectors which has probably underperformed the most on a three, six-month kind of a basis and it has probably taken the most of the pounding,” he said. He believes the sector may find favour due to mean reversion and its somewhat limited direct exposure to the ongoing geopolitical conflict.
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