Daily Voice: Earnings growth to stay resilient across market caps despite slow sentiment recovery, says TCG AMC chief

As a result, companies benefiting from these trends may sustain healthy earnings growth even as global uncertainty weighs on market valuations, he said in an interview with Moneycontrol. Madon views El Niño as a serious but manageable risk, posing a greater threat to inflation and rural incomes than to the broader economy. Do you expect foreign investors to return decisively to Indian equity markets once crude oil prices ease?

Over the last 18-20 months, global markets - including developed markets and select emerging markets such as Taiwan and South Korea - have been driven overwhelmingly by the AI theme. The rapid AI infrastructure build-out has fuelled exceptional demand and led to aggressive extrapolation of earnings growth for a narrow set of companies. While we remain believers in the long-term AI opportunity, the current narrative and earnings expectations appear somewhat stretched in the short to medium term.

In contrast, India offers a broader and more diversified structural growth story. A continued recovery in corporate earnings, supported by robust macroeconomic fundamentals, remains key. Manufacturing, defence, energy transition, and digital infrastructure continue to benefit from strong policy support and long-term capital investment. As per recent IMF report, India is the only major economy with upwards growth revision for FY27 & FY28.

As global investors look beyond concentrated AI-led opportunities, US bond yields stabilize, and crude prices normalise, India is well positioned to attract incremental foreign capital. Any moderation in AI-driven market concentration could result in a broader reallocation of global flows towards markets with strong underlying fundamentals, with India potentially being a key beneficiary. Do you expect earnings growth to remain strong, even if it takes time for market sentiment to recover?

Yes, we expect earnings growth remain resilient across market capitalization even if market sentiment takes longer to recover. However, earnings growth should not be viewed as uniform across the market. India's structural growth drivers, such as defence indigenisation, energy transition, digital infrastructure, and manufacturing expansion continue to support a multi-year investment cycle. Companies benefiting from these trends may sustain healthy earnings growth even when global uncertainty weighs on market valuations.

How significant is the risk posed by El Niño to the Indian economy and equity markets? El Niño is a serious but manageable risk, more of a threat to inflation and rural incomes than to the headline economy. For equity markets, the implications are uneven. Companies exposed to rural consumption could face softer demand, while persistent food inflation keep interest rates higher than expected. In the near term, can bonds serve as an effective hedge against volatility in equity markets?

One can hold bonds for fixed income and stability. Recently RBI has called for hawkish policy where near-term rates cuts are off the table, long term bonds face the risk. Bonds can serve as a tool to diversify the portfolio, but not as an effective hedge against equity. We think volatility in the equity market as an opportunity to take advantage of attractive valuations to invest in businesses with robust fundamentals and future earnings growth trajectory.

Do you expect sentiment across asset classes to shift significantly following the outcome of the US midterm elections? The US midterm elections could trigger short-term movements across equities, bonds, currencies and commodities, but a lasting shift in global market sentiment will depend more on the policy implications of the result than on the election outcome itself. However, the impact should not be overstated.

Monetary policy, the trajectory of inflation and economic growth, corporate earnings (both domestic & Global) and geopolitical developments are likely to remain more important drivers of asset prices over time. Do you see early signs of capitulation in the midcap and smallcap segments? The recent correction has been significant. As reported on October 22, 2026 the Nifty Midcap 150 had declined around 11 percent from its August peak, while the smallcap index had fallen around 9 percent from its 52-week high which was observed in early September.

Such sharp correction does not mean broad based downtrend. Certain segments within the midcap and smallcap space are relatively more attractive than the broader market, supported by strong earnings growth trajectories. We believe, in these select segments of the market, Q2FY27 earnings results may surprise on the upside. The priority should be select businesses with strong balance sheets, credible management, sustainable competitive advantages and valuations supported by good earnings growth trajectory.

Could a further acceleration in crude oil prices prompt central banks to change their monetary policy stance more quickly? Policymakers normally treat an energy spike as temporary because it reflects supply constraint and not underlying demand. The response, however, would depend on the persistence of the price shock and its impact on inflation trajectory, economic growth and currency stability.