Indian equity markets showed resilience during Q4 FY26 [1], but analysts warn that the next quarter could bring significant volatility.
This outlook suggests a shift in market sentiment as external pressures begin to weigh on corporate profitability. If earnings decline, the previous stability of the Indian market may be challenged by a combination of global instability and resource scarcity.
Harsha Upadhyaya, chief investment officer at Kotak Mahindra Asset Management Company, said that earnings in Q1 FY27 [2] could be tested. The period covering April through June 2026 is expected to be influenced by geopolitical tensions and energy supply disruptions [1]. These factors are projected to put pressure on corporate earnings across various sectors.
Despite these risks, Upadhyaya said a cautious approach to investment is recommended rather than a total exit from the market. He said that investors should focus on specific areas that may show more stability or growth potential amid the volatility [2].
According to Upadhyaya, the banking, hospitals, and power sectors are the recommended areas for exposure [1]. These industries are often viewed as essential services or critical infrastructure, which may allow them to better withstand the energy disruptions and political instability affecting other market segments [2].
The resilience seen in Q4 FY26 [1] provided a strong foundation for the market, but the transition into the new fiscal year introduces new variables. The ability of Indian companies to navigate energy price swings and diplomatic friction will likely determine the market's trajectory through the summer of 2026 [1].
“Earnings in Q1 FY27 could be tested by geopolitical tensions and energy disruptions.”
The transition from Q4 FY26 to Q1 FY27 marks a pivot from a period of stability to one of high external risk. By recommending defensive sectors like healthcare and power, the analysis suggests that the broader market may struggle with inflationary pressures caused by energy shocks, making non-discretionary sectors the safest harbors for capital.
