Daily Voice: 360 ONE's Mayur Patel sees meaningful earnings upgrades in 2H FY27; no imminent RBI rate hike

Mayur Patel, President and Fund Manager – Listed Equities at 360 ONE Asset, expects meaningful earnings upgrades in the second half of FY27.

"Lower crude prices, stronger credit growth, a revival in discretionary consumption, and rising private capital expenditure (capex) should drive a rebound, particularly for the Nifty 500," he said.

On the Reserve Bank of India's (RBI) policy outlook, Patel said inflation may cross 5 percent this year but ruled out an imminent rate hike, as the central bank is likely to look through these transitory pressures and prioritise growth.

"The RBI is currently in a liquidity-support mode, and rate hikes typically follow a period of liquidity tightening," he said.

Meanwhile, Patel expects foreign institutional investor (FII) flows, which have remained severely negative over the past three years, to improve materially over the next three to six months.

Do you see a high possibility of a significant earnings revival in the second half of FY27?

We expect meaningful earnings upgrades into 2H FY27. FY26 Nifty earnings grew around 8 percent, while Nifty 500 grew nearly twice that, a better gauge of underlying corporate earnings strength. The June quarter was hit by the West Asia conflict; we expect this pressure to ease as crude settles sustainably at $70-75 a barrel (Brent already there).

Lower crude, stronger credit growth, a discretionary consumption revival, and rising private capex should drive a rebound, particularly for the Nifty 500. Current FY27 Nifty estimates of 12-13 percent look conservative, implying around 8-9 percent YoY growth in 1H and 15 percent+ in 2H, with Nifty 500 growth likely to be even stronger in the 2H.

With concerns over West Asia easing, although the final deal is yet to be signed, do you expect a couple of rate cuts from the RBI in the second half of FY27?

The general expectation is that the RBI will hold rates with a hike later in the year more likely than a cut. As crude prices ease, inflation should moderate somewhat, though not sharply, amid supply-chain and monsoon-related uncertainty.

While inflation may cross 5 percent this year, we don't expect an imminent hike, as the RBI is likely to look through these transitory pressures and prioritise growth. It's currently in liquidity-support mode, and rate hikes typically follow a period of liquidity tightening.

What are the key reasons keeping foreign investors away from Indian equities? Do you see any possibility of FII flows turning positive in the current fiscal year?

We expect FII flows to improve materially over the next 3-6 months. FPIs sold around $35 billion since September 2024 on the "cheap China" trade, and later India's "missing AI play", but the real driver was expensive valuations, with Nifty well above its long-term average. The March 2026 around $13 billion outflow was purely crude/Hormuz-driven, not structural.

Easing Brent, RBI's FCNR(B) push, easier ECBs, wider FPI G-sec access, and the removal of withholding tax should draw $60-80 billion (around 2 percent of GDP) in fresh inflows; we see scope for meaningful inflows this year. This should also support the rupee, given how closely INR and Nifty tend to move together. With reasonable valuations too, the case for positive FII flows this year looks compelling.

Do you still find it difficult to take a call on the technology sector?

We remain significantly underweight Indian IT services despite the correction. For large-caps, absolute downside looks limited. Valuations sit at a good discount to historical averages, and 4-6 percent dividend yields offer support. But GenAI-led deflation risk hasn't cleared; the sector faces at least 3-4 percent deflation, with room to rise further.

Frontline players need to move faster on AI-led transformation. M&A that adds real AI capability, not just revenue, will be the key differentiator. This also raises questions about dividends, since the current 4-5 percent payout is what's providing support. We would wait for clarity on AI-led revenue deflation before turning constructive.

Yes, we’re positive on banking/NBFC, consumer tech (quick commerce), and telecom, while staying cautious on IT services.

In Banking & NBFC, system credit growth has accelerated to 17-18 percent YoY. RBI's liquidity measures should ease liability-side pressure further. NIM pressure looks largely behind us, asset quality stays benign, and valuations remain reasonable.

Quick commerce is consolidating rapidly despite remaining in a high-growth phase. Players are pivoting from discounting to unit economics, supporting margins even as penetration headroom stays large.

In Telecom, ARPU is climbing on premiumization, with more room as tariffs rise. The weaker player has survival room via regulatory relief but needs further tariff hikes to grow.

How do you assess the macro stress tests conducted by the RBI on banks and NBFCs?

RBI's recent Financial Stability Report is reassuring for banks. Slippages are at a decadal low, asset quality across unsecured retail, corporate and MSME is healthy, and capital adequacy stays strong, with CET1 above 11 percent even under stress scenarios.