India Equity Strategy: Supportive 1Q Earnings & AI-Rotation

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India Equity Strategy: Supportive 1Q Earnings & AI-Rotation

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30 Jul 2026 22:00:00 ET │ 19 pages

India Equity Strategy

Supportive 1Q Earnings & AI-Rotation

CITI'S TAKE

Surendra Goyal, CFA AC

1Q results, so far, have been ahead on earnings even though subdued on an +91-22-6175-9870

absolute basis (+5% YoY; 4% ahead of CitiE). Importantly, drivers of the surendra.goyal@citi.com

subdued earnings have been along expected lines and may ease ahead –

NIM pressure at banks & input price inflation. Consumer (especially Vijit Jain

Discretionary) has delivered better than expected growth and profitability – +91-22-6175-9887

sustainability is a key watch given monsoon trends and festive season will vijit.jain@citi.com

be in focus in couple months. Indian equities (particular Tech) have been net

beneficiaries in the global AI Rotation trade (~US$3bn net inflows in Indian

equities since mid-Jun & NIFTY IT up ~20% MTD). Further outperformance

from here requires broadening of AI-trade and sustained improvement in

domestic demand environment (along with moderation in commodity cost

inflation). Overall, we remain constructive as NIFTY trades at LTA multiples.

1Q EBITDA trends for 58% of BSE-100 — While absolute growth looks subdued

(EBITDA +2% YoY), it is nevertheless well ahead of estimates (5% ahead). Headline

growth has been impacted by expected drivers: subdued PPOP growth in Financials

(NIM compression), OMC losses and Airline margin compression, FX-depreciation

benefit for exporters. Consumer sectors (especially Discretionary, across Autos and

Durables) have been significantly ahead and have seen upgrades. Materials (Paints,

Steel, Cement) have seen strong EBITDA beats and YoY growth.

NIFTY EPS and Upgrades/Downgrades — Overall thus far, Autos, Consumer