Kunal Vora, Head of India Equity Research Analyst, BNP Paribas Securities India
Despite growing uncertainties, BNP Paribas is confident of corporate earnings bouncing back in the next fiscal and the bellwether Nifty 50 touching 29,500 points by year-end. It is optimistic on large caps, banking, IT and telecom, while seeing opportunities in energy transition. Kunal Vora, Director – Head of India Equity Research Analyst, BNP Paribas Securities India, said the corporate earnings will be driven by policy initiatives and domestic demand. Excerpts:
How confident you are on earnings growth, given the prevailing economic uncertainty?
The bounce back in private sector banks will provide a big cushion for earnings growth next year. Private sector banks account for one-third of the market. Consider their earnings growth from zero last year to 18-20 per cent next fiscal because of credit growth of 12-13 per cent. Some improvement in margin will provide a big cushion because it is also the largest sector.
In telecom, there is a high likelihood of tariff hike. There has been strong momentum in auto sector since November due to GST cuts and it should continue at least for the next one year. Consumer staples have a very low base and even if they go up 10-12 per cent, it will be good. There is some confidence that IT services will benefit from 5 per cent currency depreciation. The sector is very close to the bottom in terms of growth rate and it may hit a high single-digit growth. In fact, there’s no place currently where we are too concerned about earnings further deteriorating. The next one year looks optimistic.
What are your expectations from the Budget?
The government has done a lot already. They have lowered income tax and GST rates. The headroom available now in the Budget is low. Income tax rates cannot be further lowered. Similarly, direct, indirect tax rates and corporate tax cannot be cut further. The nominal GDP growth rate right now is moderate. From an RBI dividend perspective, it is already at an elevated level. The full impact of GST rate cut is not really visible in FY26 and will have full impact in FY27. It is going to be more of, say, status quo kind of a Budget. I would not expect big changes in terms of tax rates.
How confident you are that MF inflows will continue given the poor returns from MFs in the last one year?
The MF industry campaign to educate investors has done well to create long-term investors. Moreover, there is no alternative investment avenues. The perception is that Nifty has not done well at the headline levels. However, Nifty has delivered positive returns consecutively for the last 10 years. The five-year returns of mid and small caps are still running at 25-30 per cent CAGR. Compared to this, fixed deposits are not giving much return. So finally, investors still need to come back to equity market. Unlike in the US, Hong Kong and Singapore, investors in India are dependent only on the domestic markets. In India, there are no hot themes like AI. So the 10-15 per cent earning growth with equity taxation is still attractive.
Do you think mid and small-cap valuations have normalised after the recent fall?
Mid caps look slightly better compared to small caps. I think the premium of small caps is still elevated. So, mid caps are now getting closer to the normal premium. Mid caps have traded historically at a premium compared to large caps. But in case of small caps, they historically traded at a discount. However, today it is still trading at about 20 per cent premium. Mid caps look slightly better than small caps. However, large caps are expected to outperform both mid- and small-cap stocks, driven by relative valuation comfort.
Jewellery companies are reporting higher sales despite buyers keeping away due to high gold prices. How should investors look at this trend?
Jewellery companies’ growth is purely based on gold prices rather than volume. Since gold prices have rallied a lot, consumers who were planning to buy 20 tolas (233 grams) are now buying only 15 tolas. Since gold prices have doubled, there will be no volume growth, but that’s reasonable. The jewellery market is still 75-80 per cent unorganised. Despite Titan being a large brand, it has only about 10 per cent market share. The unorganised-to-organised trade will continue in case of jewellery.
Which sectors are you bullish and bearish on this next fiscal?
We like that financials and telecom continue to look good. In auto, four-wheelers appears better after the GST rate cut. Consumer staples will become incrementally positive after not being able to report growth for the last one-and-a-half years. We are bearish on infrastructure as government will prioritise consumption over infrastructure this year. However, there will be higher spending on roads and railway projects. There will be no big earnings growth in pharma. We have mixed views on IT services due to attractive valuations.
Published on January 8, 2026
