Global Shock Threatens FY27: Manish Sonthalia Warns of 12-13% Earnings Reset

• Manish Sonthalia, CIO of Emkay Investment Managers, predicts a 12-13% earnings reset due to war-led supply and inflation shocks, potentially making FY27 a 'washout year'.
• Geopolitical tensions, especially around Iran, are causing supply chain disruptions and rising energy prices, leading to a 'supply shock, an inflation shock… which will see into growth shock and demand reset'.
• Markets might look beyond FY27 weakness to a normalized FY28 with 15% earnings growth, but this depends on the conflict's duration.
• Valuations are becoming supportive, with benchmark indices trading at 17-18 times earnings, similar to COVID levels, suggesting a potential bottom.
• Financials, defence, power, renewables, and premium consumption are resilient, while technology stocks offer value after corrections; travel, airlines, and real estate face near-term pressure.

Key Questions Answered

How will geopolitical tensions impact future market growth?

Geopolitical tensions are impacting market growth by causing volatility, delaying IPOs, and potentially reducing global ad spend.

Which sectors might perform well despite market volatility?

Sectors like power, pharmaceuticals, financials, and manufacturing may perform well despite market volatility.

Could Indian markets see a quick recovery after this downturn?

Indian markets may see a gradual recovery as analysts suggest buying near support levels. The market has corrected over 15%, with mid-caps and small-caps falling further.