5 Sectors Set to Drive FY26 Earnings Growth, Says Portfolio Manager

Expert Insights on FY26 Earnings Growth

Ashwini Shami, Executive Vice President & Portfolio Manager at OmniScience Capital, shares his insights on the sectors poised to boost FY26 earnings growth. According to Shami, banking and financial services, defence, capital goods, power, and EPC sectors are expected to drive earnings growth.

Sectors Poised for Growth

Shami expects capital investment in infrastructure to regain momentum, which will positively impact the capital goods and EPC sectors. The defence sector is likely to see a significant focus on order book execution post-Operation Sindoor, boosting topline growth for defence companies.

Key Sectors to Watch

• Banking and Financial Services: Expected to drive earnings growth, with a focus on capital investment in infrastructure.
• Defence: Likely to see significant growth post-Operation Sindoor, with a focus on order book execution.
• Capital Goods: Expected to benefit from increased capital investment in infrastructure.
• Power: Poised for growth, driven by increased focus on infrastructure development.
• EPC: Expected to see strong growth, driven by increased capital investment in infrastructure.

Market Triggers and Risks

Shami highlights that inbound FII flows, low inflation numbers, interest rate cuts, and a good monsoon are some of the positives that could help sustain the rally in the coming months. However, geopolitical tensions, Trump’s tariff policies, or a spike in inflation could have a negative impact on the markets.

RBI Rate Cut Expectations

Shami expects a 25 bps rate cut in the June meeting, as inflation has consistently remained below the RBI’s target of 4 percent. This will be the third rate cut of the year and is expected to be followed by another cut in August.

Investment Strategies

Shami advises against investing in FMCG and consumer durables due to growth concerns or extreme overvaluation. Instead, he recommends exposure to the consumption space through banks and specific financial services companies, such as housing finance firms.

Conclusion

The sectors poised to drive FY26 earnings growth are banking and financial services, defence, capital goods, power, and EPC. Investors should consider these sectors for potential growth, while being mindful of the risks and market triggers.