Q3 FY26 Earnings Season: Rishabh Nahar Predicts Significant Sector Divergence
Rishabh Nahar, Partner and Fund Manager at Qode Advisors PMS, believes that the Q3 FY26 earnings season will be more critical than usual. Markets are currently looking for confirmation rather than commentary, making actual delivery crucial. According to Nahar, there will be significant divergence across sectors, with some companies outperforming expectations while others may struggle.
He also notes that the staples sector is no longer a high-growth area in the traditional sense. Instead, it represents a steady compounding space rather than a fast-growth story. This shift in the sector's dynamics means that investors need to have more grounded expectations.
IT Sector: Strategic Acquisitions and Uneven Recovery
When asked about Coforge’s large acquisition in the mid-tier IT space, Nahar sees it as a strategic move. Mid-tier IT companies are not waiting for demand to return organically; they are proactively acquiring capabilities that they believe clients will pay for in the next cycle, particularly in digital engineering and AI. While this is a sensible move, Nahar cautions that it does not necessarily signal a blanket recovery for the IT sector. The recovery is likely to be uneven, with returns depending on execution and positioning.
Auto Ancillaries: Multiple Growth Drivers
The auto ancillary sector is another area of interest. Nahar believes that ancillary companies benefit from multiple trends, including modest growth in vehicle volumes, higher value addition, more electronics, and export opportunities. However, differentiation is key. Companies that can offer pricing power, technology depth, or strong relationships with global OEMs are more likely to see significant benefits.
Staples Sector: Steady Compounding Space
The staples sector has matured, with single-digit growth likely going forward. Nahar emphasizes that many categories are now mature, and competition has increased, which naturally limits growth and margins. From an investor's perspective, this means that expectations need to be more realistic. However, staples still play an important role in portfolios. Positive earnings surprises can occur when rural demand improves or input costs ease, making it a steady compounding space rather than a fast-growth story.
Gold and Silver Stocks: Portfolio Stabilizers
Nahar advises viewing gold as a portfolio stabilizer rather than a pure return generator. Gold tends to perform well during periods of uncertainty, whether due to global geopolitics, currency volatility, or real interest rate movements. For gold financiers, performance depends more on lending discipline, customer quality, and cost control. While a rising gold price can boost sentiment, sustainable returns come from effective business management.
Q3 FY26 Earnings Season: Confirmation Over Commentary
The Q3 FY26 earnings season is expected to be more important than usual because markets are looking for confirmation rather than commentary. Expectations are already built into prices in many areas, so actual delivery will matter. Nahar predicts a lot of divergence, with some companies surprising positively and others falling short. Stock-specific factors will be more influential than broad sector trends.
Capital Markets and Real Estate: Structurally Favorable
The long-term capital markets story remains intact, with financial participation in India continuing to deepen. Short-term cycles will come and go, but the overall trend is favorable. For real estate and other rate-sensitive sectors, 2026 could be supportive if interest rates remain stable and demand stays healthy. However, performance will vary widely across regions and companies, making selectivity crucial.
Potential Surprises for Equity Markets in 2026
One potential surprise for equity markets in 2026 could come from global markets. A sharp correction in developed markets, especially in crowded themes, could impact risk appetite globally, including in India. On the domestic front, the surprise could be earnings-related. Either earnings could come in weaker than expected, or they could surprise positively if demand and margins improve faster than anticipated. Markets are currently positioned somewhere in the middle, so any deviation could move sentiment sharply.
