Asia Earnings Boom Draws Foreign Investors Away, India's Recovery Hinges on Corporate Results

Asian Earnings Cycle Attracts Global Investor Attention

Asia is experiencing a strong earnings cycle that is drawing the attention of global investors and influencing capital flows across markets. According to Sridhar Sivaram, Investment Director at Enam Holdings, earnings growth in key Asian markets is expected to be substantial, with Korea forecast to experience 100% growth, Taiwan to see 30% plus growth, and China to achieve 15-18% earnings growth.

This stronger earnings momentum in other Asian markets is partly attributed to the recent outflows by foreign institutional investors from India. Sivaram emphasizes that the recovery in Indian equities will depend on the return of corporate earnings growth, particularly among large-cap companies. When earnings growth resumes in India, foreign institutional investors (FIIs) are expected to return, followed by a market recovery.

Market Performance Linked to Earnings Trends

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Sivaram notes that market performance is closely linked to earnings trends, with stock markets acting as "slaves" of earnings. The current geopolitical environment adds uncertainty to the near-term outlook, but if tensions ease and earnings growth improves, large-cap companies may lead the next phase of the market recovery.

Potential Disruption in IT Services Sector

The IT services sector is facing structural disruption due to artificial intelligence (AI). Sivaram warns that the impact may unfold gradually, similar to earlier industry disruptions, such as the emergence of OTT platforms in the media sector. The IT sector may continue to grow, but valuations could remain under pressure if growth rates stay moderate.