Fmcg Could Outshine It Guidance Key This Earnings Season Narendra Solanki

As India's first-quarter earnings season gets underway, investors are preparing for a series of management commentaries that could set the tone for markets over the coming quarters. While sectors such as banking, manufacturing, auto ancillaries and healthcare are expected to deliver steady performance, the spotlight will also be on whether information technology companies revise their growth outlook amid a challenging global environment.Narendra Solanki from Anand Rathi Shares & Stock Brokers believes the upcoming results will largely reinforce the strength of domestic-facing sectors, while export-oriented industries like IT may continue to face pressure.IT Likely to Remain Under PressureThe IT sector is expected to remain in focus this earnings season as investors assess the impact of artificial intelligence-led disruption, delayed client spending and global uncertainty on growth prospects.According to Solanki, caution remains warranted despite attractive valuations. Results are around the corner, and the first results will start coming from the 9th. Coming to the IT sector, our positioning is neutral to cautious, especially in this quarter. The sector is currently facing multiple headwinds, right from AI disruption to the West Asia crisis. We are also seeing deals being delayed, with clients not committing upfront, so deal closures are not happening at the pace we used to see. These factors are likely to continue impacting the IT sector in the near term, he said.While near-term challenges remain, he believes the second half of the financial year could witness an improvement. One thing is certain: the second half is going to be better than the first half. However, one key risk remains whether there is any possibility of trimming the FY27 growth guidance, especially at the higher end. That is something the market should watch carefully in the management commentaries this quarter. The top-end guidance of around 2.5% to 3.5% now looks difficult, especially after recent commentary from Accenture. That is why our stance remains neutral to cautious in Q1, he said.FMCG May Spring a Positive SurpriseWhile markets have largely been optimistic on sectors such as auto ancillaries, manufacturing and power transmission & distribution, Solanki believes the biggest surprise could emerge from FMCG and discretionary consumption.He points to easing inflation, lower crude oil prices and resilient demand trends as factors that could support stronger-than-expected earnings. Broadly, sectors like auto ancillaries, manufacturing and power T&D should continue to perform well. The surprising factor may come from the FMCG pack, where markets are currently cautious. However, there have been decent price hikes in the FMCG space, overall inflation has come down, crude oil prices have softened, and both rural and urban demand have shown resilience. So, there can be a positive surprise, especially in the FMCG or discretionary space, he said.He also expects domestic manufacturing, healthcare and banking to remain strong performers. Auto and auto ancillaries should continue to perform well. The hospitals segment within healthcare should also perform well. Banks are expected to remain strong, with overall credit growth at around 7.7%. Industrial growth data is also promising, so overall the domestic manufacturing sector should continue to perform well, he said.PSU Banks Continue to OutshineAmong financials, Solanki continues to favour public sector banks over their private-sector counterparts, citing consistent earnings growth, improving profitability and healthy asset quality. Compared with private banks, we remain committed to public sector banks because they have continuously posted better growth over the last seven straight quarters, and there is no reason for that momentum to stop. Return ratios are improving, asset quality continues to remain good, and provisioning has been very healthy, with more than an 80% provisioning run rate. We do not see any near-term risk and continue to favour public sector banks over private banks, he said.Real Estate Rally May Be Nearing a PauseAlthough real estate stocks have staged a sharp recovery, Solanki believes much of the optimism has already been reflected in valuations. Rising inventory levels could begin to weigh on the sector in the coming quarters. Most of the rally has already been done. If you look at inventory build-up, it has risen from 14 months to 18 months, which is the first alarming sign. The good part of the rally is behind us, and after one or two quarters we could start seeing some consolidation or slack in the sector. Unsold inventory is steadily rising and now stands at around 18 months, which could impact the second quarter, he said.Management Guidance Will Be the Biggest TriggerBeyond the headline earnings numbers, Solanki believes management guidance will play a decisive role in shaping investor sentiment, particularly in the IT sector where expectations may still be too optimistic. As I mentioned earlier, IT may be trading at historically lower valuations in terms of price-to-earnings ratios, but any cut in guidance by companies, especially in the first half, may not yet be fully priced in by the market. That will remain one of the key things to watch in the management commentaries, he said.The Bottom LineThe Q1 earnings season is shaping up as a test of sectoral divergence rather than broad-based strength. Domestic themes—including PSU banks, manufacturing, healthcare and auto ancillaries—are expected to remain resilient, while FMCG could emerge as an unexpected outperformer. In contrast, IT companies face heightened scrutiny, with investors closely tracking demand commentary and any revisions to growth guidance that could influence market sentiment in the months ahead.