Mr. Arpit Agrawal, Co-Founder and CIO at Electrum Portfolio Managers shred his insights regarding Q1 numbers and their impact in coming future.
Mr. Arpit Agrawal, Co-Founder and CIO at Electrum Portfolio Managers, talked to us in an exclusive interview to give a detailed review of Q1 FY26 earnings in key sectors.
The auto sector saw mixed numbers, driven by premium-isation and export revival, with ancillary companies increasing new customers and new products. Textiles saw mixed outcomes, with garment manufacturers getting support from US frontloading of imports before tariffs, while urban consumption trailed as there was a slowdown and competition from e-commerce.
Consumer durables were hit by demand weakness due to unseasonal rains despite seasonally expected demands, while cables and wires outperformed on strong Transmission & Distribution (T&D) and renewable energy demand.
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Pharma generally performed as per expectations; domestic players grew through price plays and new launches against volume weakness. Custom synthesis companies registered modest growth. Strong capex cycles were observed, with future product launches such as Semaglutide being seen as long-term growth opportunities.
The IT space underperformed with the large caps recording low single-digit growth while mid/small caps recorded select robust organic growth due to company-specific factors. Macro uncertainties continued to keep discretionary spends weak, and most transactions are centered on low-margin cost reduction. Wage increases were pushed out, there were layoffs, and restructuring in large companies as margin squeezes were witnessed.
In the days ahead, Mr. Agrawal hopes the upcoming festive quarter will support demand, particularly in autos and consumer durables. GST cuts have postponed demand, paving the way for a healthy Q3, most notably supporting small and small-entry cars and two-wheelers. Sales of tractors could benefit from favorable monsoons, although CVs and passenger autos are under pressure.
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Consumer durables and electronics are likely to bounce back with GST cuts. Value retail and FMCG segments continue to be in a position to leverage seasonal demand boosted by increased disposable incomes, declining inflation, and potential interest rate reductions favourable for rural and urban consumption.
Mr. Agrawal observes a noticeable shift in capital toward companies with minimal export exposure due to fears stemming from prospective US tariffs. Since the US is India’s largest export destination, sectors heavily reliant on exports like engineering goods and electronics face pressure. Consequently, domestic consumption-driven names and financials are gaining investor interest, supported by government capex and efforts to revive manufacturing.
Addressing RBI’s GDP growth revision down to 6.5% for FY26 and commentary on subdued urban demand, Mr. Agrawal concurs that ongoing tariff uncertainties justify caution. He warns that export headwinds could ripple through manufacturing growth and ultimately impact inflation and consumer spending. Nonetheless, GST cuts and easing interest rates may provide some support to sluggish urban demand.
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Mr. Arpit Agrawal's observations display a balanced earnings picture with sectoral variations and shifting market trends. The expected festive period and domestic consumption growth can trigger revival. Investors should look at quality domestic plays while considering tariff-driven risk and macroeconomic vagaries in the course of the year.
