Earnings Cut Ahead But Worst Is Behind Us: Edelweiss MF CIO-Equities Trideep Bhattacharya Shares Market Outlook

In 2026, the equity market is navigating a dynamic and complex macroeconomic landscape which has been shaped by geopolitical headwinds. Speaking at a press meet held to commemorate Edelweiss AMC crossing the Rs 1 lakh crore equity and assets under management milestone, Trideep Bhattacharya, CIO, Equities, said the upcoming corporate earnings cycles are set to reflect the impact of geopolitical headwinds, but the ‘worst is behind us’.

June Quarter to Face Geopolitical Headwinds

Bhattacharya told Outlook Money that the corporate earnings for the June quarter are expected to bear the brunt of the West-Asia conflict, particularly concerning volatile energy costs.

"My sense is that the June quarter will bear the impact of the West Asia conflict, which, for all practical purposes, for India has been an oil price conflict," Bhattacharya said.

As oil prices hovered around elevated levels in the first six months of 2026, an earnings impact is imminent. Bhattacharya expects an earnings cut of two to four per cent for FY27. However, despite these cuts, he believes that the weakness has already been anticipated by the broader market as the benchmark indices are off nearly 5 per cent from their recent peak.

"I think on net balance we would expect an earnings cut of about 2 to 4 per cent for FY27 on the back of the June quarter results. Despite these cuts, the broader market has largely priced in the expected weakness. If you look at the cut against that, the markets are down about five per cent from the peak. So it's kind of anticipated that we expect this sort of weakness to come through in the June quarter," Bhattacharya said.

Looking ahead toward the second half of the year, Bhattacharya highlighted a clear timeline for recovery and mentioned that "the pre-festive season should capture the worst of this impact".

Vocal For Local!

Bhattacharya told Outlook Money that local-facing industries or domestic industries are better positioned than export-oriented sectors currently. He highlighted that financials stand out defensively.

"One such segment would be financials because the entire segment is, or the majority of the segment is domestic and domestic focused", Bhattacharya said.

He added that the domestic credit trajectory shows immense strength, and he expects this trajectory to shift gears aggressively if global conditions stabilise.

"The credit growth in the economy bottomed out at about 8 to 10 per cent late last year; it is currently hovering around 15 to 16 per cent. If we do genuinely come out of this West Asia conflict, then the credit growth would be somewhere around 16 to 20 per cent as we go over the next 6 to 12 months," Bhattacharya said.

For specific tactical positioning, he stated, "We are probably most positive on private sector banks".

He also mentioned that there will be opportunities in the industrial sectors as the conflict in West Asia moves towards a truce and reconstruction activity starts globally.

"I do see some capital goods companies that would participate in the post-war reconstruction as a beneficiary," Bhattacharya said.

However, he added that high commodity prices are expected to hit specific sectors within the broader consumer discretionary category, such as tyres, and autos. Meanwhile, delayed monsoons are expected to hit rural demand.

"As an impacted sector of delayed monsoon, I would point to mass consumption, which has higher salience towards rural areas," Bhattacharya said.

However, within the FMCG space, there will be a distinct push for premiumisation, creating major opportunities for brands catering to upgraded consumer demands.

Energy Lessons From Choked Strait

He also emphasised that energy security is set to be a vital structural theme for India and pointed out that, given the heavy dependence on the Strait of Hormuz, the push for self-reliance is imminent.

"70 to 80 per cent of our (petro-chemical) imports come from one strait of Hormuz," Bhattacharya said.

To mitigate this risk, significant domestic capital is expected to change direction.

"Over the next 3 to 5 years, a lot of investment will go in this direction to diversify the energy base of India", Bhattacharya said.

However, he added that this is expected to take place in phases. While the first phase might be about coal becoming the primary driver to bridge immediate energy needs. Nuclear and renewable energy are expected to take centre stage in later phases of this transition after India stabilises its energy requirements.

Artificial Intelligence, Real Impact

Bhattacharya also spoke about AI and IT sector stocks and revealed that while structural growth is visible in technology, Edelweiss MF remains underweight on Information Technology due to an ongoing transition phase.  Bhattacharya acknowledged the transformative power of Artificial Intelligence but warned of near-term operational resets.

"We think that AI is probably the single biggest tech wave that we have seen in the last 10 years. But it is a tech wave which we will have to survive through," Bhattacharya said.

He explained that global companies are currently adjusting their delivery metrics to this new technological reality.

"The IT services sector is in the about four to six quarters of transitory pain, if you may call it in that context, and will have to recalibrate and readjust their service offerings," Bhattacharya said.

As a result of this necessary adjustment phase, he noted, "during this time we are underweight in our portfolios".

The asset management company mentioned in a release that the crossing of the Rs 1 lakh crore AuM milestone shows the trust reposed by investors and distribution partners in the fund house’s philosophy and long-term approach to wealth creation.

Radhika Gupta, MD & CEO, Edelweiss Asset Management Company, also spoke about the development and mentioned that the fund house remains committed to offering differentiated product solutions backed by strong research, robust risk management and a consistent investment approach.

"Crossing the Rs 1 lakh crore Equity and Hybrid AUM milestone is an important moment in Edelweiss AMC’s  journey and reflects the growing confidence that investors and distribution partners have placed in us over the years. This achievement has been supported by strong consistency in performance of our Equity and Hybrid Funds and widening distribution reach. We remain committed to offering differentiated product solutions backed by strong research, robust risk management and a consistent investment approach. We thank our investors, partners and employees for their continued trust and support, and look forward to helping more investors participate in India's growth story," Gupta said.