Indian equity markets may be poised for another leg higher in the coming months as strong corporate earnings, resilient consumer demand, and hopes of easing geopolitical tensions continue to support sentiment, according to market expert Sandip Sabharwal in an interaction with ET Now.
After recovering nearly 10% from the March lows, investors are now closely watching whether the rally can sustain itself amid elevated crude oil prices, mixed global cues, and uncertainty around the West Asia conflict.
“The result season is actually turning out to be quite good overall,” said Sabharwal, pointing to strong performances from consumer-facing businesses despite multiple cost pressures.
Crude Oil Remains the Biggest Variable
Sabharwal noted that oil prices continue to be the key uncertainty for markets. While geopolitical developments have periodically triggered sharp spikes in crude, he believes the overall structure suggests prices may correct sharply if a formal resolution emerges in West Asia.
“So, once the actual deal happens, from the looks of it it seems that crude prices could crack pretty strongly,” he said.
He added that the Indian government’s decision not to raise fuel prices has helped preserve the consumption momentum generated by earlier GST cuts and tax relief measures.
According to Sabharwal, the Indian economy currently appears “pretty well placed,” though a renewed escalation in global hostilities or another commodities spike could once again create pressure on markets and inflation.Markets Could Have Been Higher Without the War
Sabharwal believes Indian equities would already have been trading at fresh record highs had the geopolitical tensions not pushed oil prices toward the $100 mark.
“I would think that if the war was not there and given the way the results have come out and the outlook would have been if the crude oil prices were $70-80 and not $100 which they are today, the markets could have been 7% to 8% higher than what they are right now,” he said.
He expects markets to eventually move toward new highs over the next few months if geopolitical stability returns and earnings momentum continues.
Earnings Remain the Core Driver
While several global markets have already touched record levels, Sabharwal stressed that long-term market performance ultimately depends on earnings growth.
“Markets are slave of earnings, so eventually it will track how earnings do,” he said.
He contrasted India with markets such as South Korea, where companies linked to the artificial intelligence boom and component shortages are witnessing exceptionally strong earnings momentum.
India may not currently have a comparable technology-driven earnings cycle, but Sabharwal believes improving pricing power, moderate inflation, and stable growth could still support equities.
“The current quarter results and the commentary which is coming out of companies gives me specifically a lot of comfort,” he added.
Consumer Revival Emerging Across Sectors
One of the strongest themes emerging this earnings season has been the recovery in consumer demand.
Sabharwal highlighted encouraging management commentary from several FMCG and retail companies, including Dabur India, which he said remained optimistic about sustaining margins and growth despite rising transportation, packaging, and shipping costs linked to the Middle East conflict.
He also pointed to strong results from Pidilite Industries, which reported robust volume growth, along with improving trends among paint makers and apparel retailers.
“GST rate cuts have really helped them and they have some leeway to pass on prices because of cost impact,” he observed.
However, Sabharwal cautioned that sustained inflation could eventually affect consumer spending power if companies continue passing on higher costs.
Retail and Apparel Stocks Back in Focus
The revival in consumption is also becoming visible in value retail and fashion segments, where companies had struggled with subdued demand for several quarters.
Sabharwal cited improved numbers from companies such as Arvind Fashions and Aditya Birla Fashion and Retail as signs of a broader recovery.
“There is a definitive consumer revival,” he said, while adding that many retail and FMCG stocks remain under-owned and out of favour among investors, potentially creating opportunities if demand trends sustain.
At the same time, he acknowledged concerns raised by companies including Britannia Industries and Nestlé India regarding slower growth during March and April.
Another key variable for rural demand, he said, will be the impact of El Niño and monsoon trends on agricultural output.
Banking Sector Expectations Remain Measured
On the banking space, Sabharwal said expectations from lenders, including State Bank of India, should remain realistic amid pressure on margins.
He explained that higher funding costs, RBI rate cuts, and bond-market losses have weighed on profitability across both private and public sector banks.
“Most of the banking results have been somewhat muted because net interest income growth has been subdued,” he said.
Despite that, he expects asset quality trends to remain stable and improving across the sector, with investors likely to focus on future growth guidance and margin commentary.
Defence Stocks Still a Long-Term Theme
Sabharwal also maintained a constructive long-term outlook on defence and shipyard companies, though he advised investors to use corrections as entry opportunities rather than chase rallies.
Companies such as Cochin Shipyard and Bharat Forge continue to benefit from strong structural tailwinds tied to defence and aerospace spending.
“Shipyard companies definitely investors should be looking at them on every correction,” he said.
However, he cautioned that many defence stocks have already rebounded sharply from recent lows and could consolidate in the near term after their strong run-up.
Outlook: Stability Could Trigger a Fresh Rally
For now, the market narrative appears increasingly tied to two variables — crude oil and earnings durability.
If geopolitical tensions ease and oil prices moderate, analysts believe India’s strong domestic demand trends and improving corporate commentary could pave the way for equities to attempt fresh record highs later this year.
Sabharwal’s assessment suggests that despite lingering global uncertainty, the current earnings season has strengthened confidence that India’s economic recovery remains intact.