Stories
Markets Have Priced in Higher Rates but Not Earnings Downgrades, Says Expert
- •Markets have already factored in higher interest rates, but potential earnings downgrades remain unpriced, according to Kush Gupta of SKG Investments and Advisory.
- •A sustained market rally will depend on whether crude oil prices ease or corporate earnings hold up strongly in the coming quarters.
- •SKG Investments and Advisory is taking a selective approach to IT stocks, focusing only on companies with visible AI-related deal wins.
- •Proposed IRDAI commission caps and expense limits mean reported earnings for life insurers do not yet reflect the true regulatory risks.
- •The Indian rupee is expected to see mild depreciation rather than significant appreciation due to elevated commodity prices and falling forex reserves.
Key Questions Answered
Kush Gupta notes that while the market has successfully priced in higher interest rates, it has not yet fully factored in potential earnings downgrades. A sustained market rally will depend on crude oil prices easing or corporate earnings holding up in upcoming quarters.
IRDAI draft rules propose strict commission caps by product and channel, alongside phased expense ceilings that require life insurers to lower expenses from 20.2 percent of premium in FY26 to 15 percent by FY29. Because reported earnings do not yet reflect these proposed caps, current P/E multiples understate the risk, causing experts to avoid broad sector exposure for now.
SKG Investments expects further rate hikes of 25 basis points at upcoming monetary policy meetings. However, reversing the entire 125-basis-point rate-cut cycle would require crude oil prices to stay above $95 per barrel and the US Federal Reserve to continue raising rates.
