Earnings Season Begins This Week: Sector Outlook and Portfolio Positioning Strategies

Earnings Season Takes a Hit as US-Iran Conflict Intensifies

The earnings season, a critical driver for the stock market, assumes even more significance this time around as it comes against the backdrop of the US-Iran war and expectations that the March quarter would mark earnings revival for Dalal Street after months of below-expectations performance. India Inc was on a steady trajectory of recovery and credit expansion in the first two months of the March quarter, but the US-Iran conflict at the end of February 2026—specifically the disruption in the Strait of Hormuz—has undeniably introduced a late-quarter "speed bump."

Aggregate revenue growth is expected to remain in the 10-12% range, but analysts foresee a moderation in earnings quality due to the surge in Brent crude prices, which are expected to reach past $120/barrel following the March 4th blockade of the Strait. Increased fuel and freight costs in the final 30 days of the quarter will squeeze margins for manufacturing and logistics-heavy firms. Meanwhile, the rupee's sharp underperformance in March adds a layer of "imported inflation" that companies have not yet had the time to pass on to consumers.

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According to Vinit Bolinjkar, Head of Research at Ventura, the real impact of earnings and macro drag is expected to materialise more clearly in Q1FY27, particularly for input-cost-sensitive segments. BofA Securities has slashed its earnings growth forecast for India's benchmark Nifty 50 companies for fiscal year 2027 to 8.5%, down from 14% projected before the Iran conflict, citing rising stagflation risks, according to a Reuters report.

Analysts advise investors to remain selective and focus on chasing quality rather than momentum. Ross Maxwell, Global Strategy Operations Lead at VT Markets, suggests that investors may focus on companies with strong balance sheets and earnings visibility. "Any earnings-related volatility can be used as an opportunity to accumulate quality stocks in sectors that are structurally sound, while avoiding overexposure to stocks that are globally sensitive or vulnerable to margins."

Domestically focused sectors are expected to perform well, and analysts advise raising exposure to these names. Bolinjkar advises investors to consider increasing weightage in large-cap stocks with low leverage and strong pricing power as these "moat" companies are better equipped to absorb the current energy shock. Furthermore, he believes that the time is right to "trim positions in companies with high dollar-denominated debt or those that are unable to pass on rising input costs to their customers."