Currently, with the conflict still ongoing, even corporate managements are likely to find it challenging to provide FY27 earnings guidance with a reasonable degree of confidence, said Dikshit Mittal, Senior Fund Manager - Equity at LIC Mutual Fund in an interview to Moneycontrol.
According to him, greater clarity on the extent of disruption along with the time required for normalisation across inventories, supply chains, and demand conditions can emerge only once the situation stabilises.
Consequently, it may be necessary to wait at least another quarter for meaningful visibility, assuming conditions begin to normalise in a timely manner, he advised.
Meanwhile, after West Asia crisis-led likely impact on earnings and economy, Dikshit Mittal expects the authorities to continue taking proactive steps to support growth, while remaining mindful of fiscal prudence and government finances.
Do you think the Strait of Hormuz issue is unlikely to be resolved soon, thereby impacting supply and keeping oil prices elevated?
The geopolitical environment remains highly volatile, making it difficult to draw firm conclusions at this stage. Given that the Strait of Hormuz facilitates nearly 20 percent of global oil supply, disruptions to transit are likely to be material which could keep oil prices elevated for a prolonged period.
Furthermore, in response to such disruptions, several countries may seek to strengthen their strategic petroleum reserves, potentially creating incremental demand for oil and providing near-term support to prices.
Do you see the possibility of oil prices moving back to their March 2026 highs?
Oil prices are exhibiting heightened volatility, reacting sharply to daily news flows. While forecasting commodity prices particularly crude oil remains inherently challenging given the scale and fluidity of current events, even a swift reopening of the Strait would not immediately normalise conditions.
Physical damage to energy infrastructure and the time required for supply chain restoration could keep oil prices elevated for an extended period. Additionally, as the broader situation may take time to stabilise, a persistence of war-related risk premium over the short to medium term appears likely, providing continued support to oil prices.
Do you believe valuations have become more comfortable now, considering the expected growth numbers?
Following the recent time and price correction, market valuations have moderated to levels below their long-term averages, which provides a degree of comfort. That said, the ongoing energy crisis is likely to have some impact on earnings forecasts, although the magnitude of this impact is difficult to quantify at this stage given the multiple moving parts involved.
Prior to the Middle East conflict, consensus expectations for the Nifty 50 were centred around mid-teen earnings growth for FY27. A prolonged conflict could pose downside risks to these estimates. However, from a slightly longer-term perspective, FY28 earnings expectations are unlikely to undergo material changes at this point.
Accordingly, at current market levels, it appears prudent to adopt a longer-term view, focus on a normalised earnings scenario, and evaluate market valuations through that lens when making investment decisions.
Will the RBI’s FY27 growth forecast be achievable, given that geopolitical tensions remain unresolved?
The RBI has projected FY27 GDP growth at 6.9%. However, this outlook carries downside risks should the West Asia conflict remain unresolved, as prolonged tensions could disrupt supply chains and adversely impact capital flows.
Do you expect greater clarity on FY27 earnings growth forecasts from management commentaries during the Q4FY26 earnings season, or will we need to wait for another quarter?
At this stage, with the conflict still ongoing, even corporate managements are likely to find it challenging to provide FY27 earnings guidance with a reasonable degree of confidence. Greater clarity on the extent of disruption along with the time required for normalisation across inventories, supply chains, and demand conditions can emerge only once the situation stabilises. Consequently, it may be necessary to wait at least another quarter for meaningful visibility, assuming conditions begin to normalise in a timely manner.
Do you think concerns around the IT sector have subsided? If so, do you see a buying opportunity?
The IT sector is currently facing challenges arising from AI led productivity gains, which could disrupt certain elements of existing revenue models. That said, over the medium to long term, we view AI as a complementary force serving as a creative analyst that generates insights, patterns, and ideas while software remains the execution engine that delivers outcomes consistently and at scale. In any enterprise environment, both capabilities are essential.
Indian IT companies are well positioned in this context, supported by deep industry wide sales coverage, decades long client relationships, proprietary data and intellectual property, cross licensing arrangements, and strong ecosystem partnerships. These are further reinforced by domain expertise, brand trust, certifications, and significant switching costs for clients. As a result, we believe the sector may continue to remain relevant.
However, the eventual size of the AI related opportunity, as well as the extent of near term headwinds, remains difficult to quantify at this stage. Accordingly, while we are not writing off the sector, we remain cautious and would prefer to see clearer evidence of growth momentum returning before adopting a more constructive stance.
Do you expect significant measures from the government and regulators to support economic growth and businesses?
Over the past few quarters, the government and regulators have already implemented several meaningful measures to support economic growth, including rationalisation of direct and indirect tax rates, reduction in the cost of capital, liquidity infusion, and cuts in fuel excise duties.
Going forward, we expect the authorities to continue taking proactive steps to support growth, while remaining mindful of fiscal prudence and government finances.
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