Market Recovery Hinges on Economic Momentum: Axis Securities Report

Axis Securities suggests full recovery in consumer demand may take up to two quarters. Q1FY26 earnings highlight mixed trends amid geopolitical tensions and market fluctuations, with improvements expected later in the financial year. Key sectors like Telecom and Financials show promise despite overall economic challenges.

A recent report by Axis Securities indicates that a full recovery in the broader consumption demand across the country might require an additional one or two quarters. The report, examining the Q1FY26 earnings season, points to a range of factors affecting the market.

The first quarter of FY26 saw significant developments, including geopolitical tensions, oil price volatility, interest rate adjustments, unseasonal weather, supply chain issues, and enhanced liquidity, all contributing to mixed trends reminiscent of past earnings performances.

While some sectors show promise due to improved high-frequency indicators, the report underscores that a return to normal consumption levels remains several quarters away. Encouragingly, many earnings concerns are now factored in, and a slowdown in the rate of earnings downgrades is anticipated.

Potential market upgrades may emerge later this financial year, as economic activity gains momentum. Improvement is anticipated in Telecom, Financials, Materials, Oil & Gas, and Industrials, though sectors like Auto OEMs, Utilities, and Metals may still face challenges.

Macroeconomic risks are expected to shape market direction in the coming months. The upcoming earnings season will be pivotal, with management commentaries and forward guidance significantly influencing market sentiment.

(With inputs from agencies.)