Strong corporate earnings in Q4FY26 could offer near-term support to Indian equities, but market direction will ultimately hinge on forward-looking guidance and management commentary, said Alok Agarwal, Head – Quant and Fund Manager at Alchemy Capital Management. 

Agarwal told Fortune India that Q3FY26 had already delivered encouraging signals, with the Nifty 500 posting double-digit earnings growth, reinforcing the recovery thesis. Q4FY26 performance is also expected to remain largely insulated from the ongoing geopolitical tensions, as March 2026 was the only materially impacted month and retail fuel prices have not seen significant hikes so far. As a result, cost pressures may not fully reflect in reported financials. 

However, he noted that markets are inherently forward-looking. “What matters more is guidance. Markets do not trade on backward-looking results; they price future earnings trajectories,” Agarwal said. Key questions include how aggressively companies guide for FY27, whether they factor in sustained elevated crude prices, and how they assess demand resilience and margin pressures. 

According to him, healthy Q4 earnings combined with a constructive FY27 outlook could aid a market recovery. “In uncertain environments, narrative drives valuation more than historical performance. Management conviction, or the lack of it, will determine whether earnings offset geopolitical anxiety or reinforce it,” he added. 

Recovery delayed, not derailed 

On the broader market outlook, Agarwal said India was already navigating a slowdown before geopolitical tensions escalated. GST collections had grown in single digits for nine consecutive months while nominal GDP growth remained subdued. However, early signs of recovery had begun to emerge, with earnings improving and credit and deposit growth crossing 12%. 

Policy support has also started gaining traction. Government tax cuts, along with the RBI’s low interest rates, reduced cash reserve ratio (CRR), and surplus liquidity, had created conditions conducive to a revival in growth, before the ongoing conflict interrupted momentum. 

India’s high crude import dependency, at 85-90%, makes it particularly vulnerable to oil price shocks. Sustained elevated prices could strain key macro indicators, including the current account deficit, fiscal deficit, inflation, GDP growth, and corporate earnings. 

West Asia conflict has extended the market correction and contributed to India’s underperformance. Indian equities have lagged emerging markets by over 4,000 basis points in the past 15 months, an unprecedented divergence, Agarwal noted. 

Despite this, he sees a contrarian opportunity emerging. “Valuation excesses have largely been purged, and the correction has stretched to 18 months. Markets have priced in known risks—crude vulnerability, earnings pressures, and evolving policy response. Risk-reward has shifted in favour of adding equity exposure,” he said. 

High crude prices remain a key risk variable 

With Brent crude futures rising above $100 per barrel, Agarwal warned of immediate macroeconomic pressures if prices remain elevated for one to two months. 

India, which imports nearly 5 million barrels of crude per day, could see its oil import bill rise by $2–4 billion over this period. This would widen the current account deficit, put pressure on the rupee, and stoke inflation through higher fuel and transportation costs. 

While retail fuel prices may remain partially shielded in the short term, second-order effects across supply chains could push up the Consumer Price Index (CPI), potentially constraining the RBI’s accommodative stance. Fiscal pressures from potential subsidies and a modest drag on GDP growth are also likely. 

Although India has buffers such as diversified sourcing and healthy forex reserves, Agarwal cautioned that these offer protection only against short-term spikes. Sustained crude prices above $100 per barrel could reset growth and earnings expectations, potentially derailing the recovery narrative. 

“If prices reverse quickly, the damage may remain contained. However, if elevated levels persist, the terms-of-trade shock could deepen materially,” he said. 

Volatility offers opportunity 

On investor behaviour amid heightened volatility, Agarwal said history suggests that geopolitical corrections often present buying opportunities, even though deploying capital during periods of uncertainty remains psychologically challenging. 

He cited the famous maxim of Warren Buffett—“be greedy when others are fearful”—but noted that executing such strategies requires strong conviction, particularly when markets are driven by negative headlines. 

A potential trigger for market reversal could be any credible indication of de-escalation or ceasefire. “Markets discount future conditions, not current headlines. The moment a truce appears plausible, one could see sharp short-covering and a sentiment rebound,” he said. 

Investors who remain on the sidelines risk missing the recovery while those deploying capital into quality stocks at compressed valuations may be better positioned for an eventual rebound, he said. 

Bullish bias despite near-term risks 

Despite near-term uncertainties, Agarwal remains constructive on the medium-term outlook for Indian equities. He highlighted that India continues to be the fastest-growing major economy, and the prolonged correction over the past 18 months has eliminated most valuation excesses. 

With both economic and earnings recovery showing early signs of traction, markets may now be awaiting a clear trigger, such as an end to the conflict or a truce, to resume an upward trajectory. “The recovery is delayed, not derailed. A resolution in geopolitical tensions could act as a catalyst for the next leg of the rally,” Agarwal added.