The earnings season is one of the biggest drivers for the stock market. This time, it assumes even more significance as it comes against the backdrop of the US-Iran war and expectations that the March quarter would mark earnings revival for Dalal Street after months of below-the-expectations performance.
India Inc was on a steady trajectory of recovery and credit expansion in the first two months of the March quarter. However, the US-Iran conflict at the end of February 2026—specifically the disruption in the Strait of Hormuz — has undeniably introduced a late-quarter “speed bump.”
Earnings preview
While aggregate revenue growth is expected to remain in the 10–12% range, we definitely foresee a moderation in earnings quality, said Vinit Bolinjkar, Head of Research at Ventura. He expects a sudden surge in Brent crude, past $120/barrel, following the March 4th blockade of the Strait, which will result in margin compression.
Increased fuel and freight costs in the final 30 days of the quarter will squeeze margins for manufacturing and logistics-heavy firms, he observed. Meanwhile, the rupee’s sharp underperformance in March adds a layer of “imported inflation” that companies have not yet had the time to pass on to consumers.
The Indian rupee slumped past the 95 per US dollar mark last month amid sustained selling by foreign investors and rising crude oil prices. However, the latest RBI efforts have helped the rupee bounce back to 93 levels.
According to Thomas V Abraham, Research Analyst, Mirae Asset ShareKhan, the real impact of earnings and macro drag is expected to materialise more clearly in Q1FY27, particularly for input‑cost‑sensitive segments.
Earlier today, BofA Securities slashed its earnings growth forecast for India’s benchmark Nifty 50 companies for fiscal year 2027 to 8.5%, down from 14% projected before the Iran conflict, citing rising stagflation risks, according to a Reuters report.
Which sectors would lead and lag in Q4?
It’s a no-brainer that companies that rely heavily on crude as an input cost, such as oil marketing and paint companies, could see some pressure. On the flip side, domestic-oriented businesses may continue to show resilience as they remain insulated from crude shock.
Sectors that could lead:
- Capital goods and industrial: Long-term order books and the government’s focus on self-reliance make these sectors relatively immune to short-term geopolitical volatility, said Bolinjkar.
- BFSI: Banking and NBFCs remain the bedrock. “With credit growth holding steady at around 14% and net interest margins (NIMs) stabilising, banks are well-positioned to lead the earnings pack,” the Ventura analyst added.
- Upstream Energy & Metals: Domestic oil producers and the metals pack will benefit from the sharp appreciation in global commodity prices triggered by the conflict.
- Green Energy & Renewables: With India surpassing 50% non‑fossil fuel capacity, the focus has shifted to transmission and storage infrastructure, supported by policy‑driven capex and stable tariffs, according to Thomas.
Sectors that could lag
- IT Services: The sector continues to face “visibility issues.” We’ve seen a significant reduction in bench strength across major players, and discretionary spending in the West has hit a pause button due to the war-induced uncertainty, said Bolinjkar.
- Oil Marketing Companies: OMCs bear the brunt of the crude spike, as retail price adjustments often lag behind the rapid surge in international prices.
- Consumer Durables/Paints: These sectors are highly sensitive to crude-linked raw materials and may see a contraction in margins.
- Export‑oriented, Commodity‑linked segments (chemicals, textiles, engineering and auto‑components): These names are not yet facing a collapse, but higher input costs, shipping‑cost volatility and geopolitical‑driven demand softness in key markets are compressing margin visibility and growth expectations, cautioned Thomas.
How to position portfolio ahead of Q4 earnings?
Amid high volatility and uncertainty, investors advise remaining selective. They believe focus on chasing quality rather than momentum is the way to go now.
Ross Maxwell, Global Strategy Operations Lead, VT Markets, said that investors may focus on companies with strong balance sheets and earnings visibility. “Any earnings-related volatility can be used as an opportunity to accumulate quality stocks in sectors that are structurally sound, while avoiding overexposure to stocks that are globally sensitive or vulnerable to margins.”
Since domestically focused sectors are expected to perform well, analysts also advise raising exposure to these names. Bolinjkar advised investors to consider increasing weightage in large-cap stocks with low leverage and strong pricing power as these “moat” companies are better equipped to absorb the current energy shock. Furthermore, he believes that the time is right to “trim positions in companies with high dollar-denominated debt or those that are unable to pass on rising input costs to their customers.”
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
