Foreign Currency Non-Resident (FCNR) deposit inflows into India are expected to exceed $50 billion due to strong demand. Axis Bank's chief economist also projects double-digit profit growth for Indian companies this quarter, supported by credit expansion and a weaker rupee. Investors are expected to focus more on earnings outlook revisions rather than just historical results.
Foreign Currency Non-Resident (FCNR) deposit inflows are likely to surpass the $50 billion threshold, according to recent projections. Neelkanth Mishra, Chief Economist at Axis Bank and Head of Global Research at Axis Capital, noted that the current demand for these deposit schemes remains robust, potentially pushing total inflows beyond initial market expectations.
Earnings Outlook and Sector Trends
Corporate India is anticipated to report double-digit profit growth for the current earnings season. This outlook is primarily driven by improved credit growth across the banking system and the impact of rupee depreciation on exporters. Specifically, banks covered by Axis Capital are expected to deliver earnings growth exceeding 12%. However, the profit trajectory may not be uniform across all sectors. Certain industries continue to face pressure on profit margins due to high input costs, making operational efficiency a critical factor for investors to monitor during the results season.
Earnings Revisions and Market Sentiment
Mishra highlighted that investors are increasingly looking past reported figures to focus on earnings revisions. After several months of downward adjustments to profit estimates, there are signs that the pace of these cuts is slowing. As companies declare their June-quarter results, the market may see a shift toward upward revisions, which could influence stock price movements.
Global Factors and Foreign Investment
Despite the positive domestic outlook, an immediate or sharp return of Foreign Institutional Investor (FII) flows is not expected. Global uncertainty, combined with a strong US dollar and volatile bond yields, continues to make emerging markets less attractive as an asset class compared to safer alternatives. While India remains an economic outlier, its performance is still subject to these global macroeconomic headwinds. Additionally, while the integration of Artificial Intelligence in the IT services sector remains a long-term theme, it is viewed as a structural shift rather than an immediate threat to the industry's viability.
Consumption and Domestic Flows
Looking ahead, consumption and real estate are emerging as potential growth themes for the coming year. Expectations surrounding the next Pay Commission could lead to increased discretionary spending, supporting demand in sectors like automobiles and housing. Furthermore, the growth in Indian equity markets is increasingly being driven by domestic household savings through Systematic Investment Plans (SIPs) and mutual funds, rather than being solely dependent on tax advantages or FII participation. Investors should continue to track earnings call commentaries for guidance on margin trends and future demand as companies provide updates on their operational health throughout the reporting season.