Manishi Raychaudhuri Warns No Indian Sector Shows Earnings Inflection Yet

Veteran investor Manishi Raychaudhuri has raised concerns about the absence of earnings inflection across Indian sectors, even as he maintains his Sensex target of 91,000 by end of 2026. Speaking to ET Now, he highlighted that while several Asian markets show early signs of earnings revival, India remains notably absent from this trend, creating uncertainty ahead of the third-quarter earnings season.

Earnings Revival Elusive Across Indian Sectors

Raychaudhuri expressed disappointment over the lack of concrete earnings upgrade signals in India, despite expectations of acceleration remaining alive. "Hopefully yes, but unfortunately I have not seen any concrete indications of that yet," he stated when asked about potential earnings surprises this quarter.

The investor explained that across Asia, analysts track nearly 180-200 market sectors, with only a limited subset currently showing sustained earnings estimate upgrades. Of these, approximately 38 sectors demonstrate robust earnings estimate increases over one-month, three-month, and six-month periods.

"Unfortunately, there is not a single sector in India that shows that trend," Raychaudhuri noted, describing this absence as "a bit worrying."

Investment Strategy Amid Selective Opportunities

Despite earnings concerns, Raychaudhuri maintains his Sensex target of 91,000 by year-end 2026, implying potential upside of 7.00% to 8.00% from current levels. He continues to position India as overweight in his Asian model portfolio, emphasizing "immense" stock selection opportunities rather than broad-based market optimism.

His sectoral preferences remain focused on financials, particularly private banks that have underperformed over the past three years. Discretionary consumption through market-leading automobile companies and healthcare services via hospital and diagnostic chains also feature prominently in his strategy.

IT Services Face AI Disruption Challenges

Raychaudhuri struck a particularly cautious tone on Indian IT services, describing the sector as caught between opportunity and threat from artificial intelligence advancement. While acknowledging that over $100-150 billion per quarter in AI data center spending could eventually require traditional IT integration services, he warned of significant disruption risks.

"As a consequence of LLMs coming on and increasing adoption — not just for creating text and videos but also for writing code — there is a significant degree of the service offering of Indian IT companies that is threatened," he explained. The availability of advanced large language models at negligible cost enables developers to bypass traditional service models, creating structural challenges for the sector.

For AI investment exposure, Raychaudhuri prefers "adopters who are able to increase their revenues using LLMs, and also the picks-and-shovels companies — memory companies, or Chinese and Taiwanese chip manufacturers and fabricators."

Regional Growth Dynamics and Fiscal Themes

The investor highlighted strong momentum in Asian equities, with MSCI Asia ex-Japan rising more than 4.00% in early 2026. Key themes include continued fiscal expansion across developed markets, including U.S. President Donald Trump's policy initiatives and European infrastructure spending expected to reach around 5.00% of GDP over time.

Regarding China, Raychaudhuri noted that recent U.S. sanctions affecting approximately 4.00% of crude oil imports represent a marginal impact compared to deeper domestic challenges. "The biggest issues are household and domestic consumption, which are influenced by the property market that has been in a downturn over the past five years," he observed.

For India, he emphasized the need for increased infrastructure investment and private capital expenditure, while awaiting signs of urban demand recovery and fiscal consolidation measures in upcoming budget announcements.