Earnings Trump Trade Hopes: BofA India Equities Head
Overview
BofA Securities' Arbind Maheswari stated progress in India-US trade talks could lift market sentiment. However, he stressed that sustainable long-term equity gains depend more critically on corporate earnings growth and overall economic performance. BofA forecasts 14% earnings expansion and a ~12% Nifty return this year, with foreign outflows potentially reversing.
Trade Hopes vs. Earnings Reality
Arbind Maheswari, Head of India Equities at BofA Securities, stated on January 14, 2026, that while progress in India-US trade talks could offer a positive jolt to market sentiment, the sustainability of stock market gains rests squarely on corporate earnings and economic performance.
Recent comments from the US ambassador signaling forward movement in trade discussions were noted as a positive development. Maheswari characterized the trade situation as a "disagreement between friends," suggesting a resolution would provide a significant sentiment boost for investors.
BofA Forecasts Earnings Growth
However, Maheswari cautioned that consistent returns will ultimately be dictated by the nation's economic health and company profit margins. BofA Securities projects Indian corporate earnings to rebound after a period of subdued growth, estimating an expansion of approximately 14% for the current year. This profit growth is expected to underpin a return of around 12% for the Nifty index.
He noted that current market valuations are already elevated, sitting above their long-term averages. This limits the potential for further gains driven by increased multiples alone. "Earnings growth is what is going to drive Nifty returns this year," Maheswari asserted.
Foreign Investor Flows Outlook
Regarding foreign investor sentiment, Maheswari observed that global funds continue to favor markets with strong exposure to artificial intelligence (AI) and semiconductor themes, such as South Korea, Taiwan, and Japan. India's limited listed exposure to these specific areas has contributed to its recent underperformance, he commented.
Despite this, he anticipates a reduction in selling pressure from foreign institutions. With potential US interest rate cuts and a weaker dollar on the horizon, emerging markets could see improved capital inflows. BofA's base forecast anticipates foreign outflows from India to cease, potentially transforming into modest inflows later in the year.
Domestic Economy Drivers
On the domestic front, Maheswari indicated that past reductions in interest rates, tax adjustments, and an anticipated government salary increase should bolster consumption over time. He also expects further supportive policy measures to be announced in the upcoming February budget aimed at stimulating economic growth.
AI's Evolving Financial Impact
Looking at specific sectors, Maheswari highlighted financials and rate-sensitive cyclical stocks as areas with clearer earnings visibility. He suggested that broader earnings growth across all sectors might take longer to materialize, potentially becoming more evident in fiscal year 2026-27.
He also touched upon the impact of AI on the banking sector, noting its current role in improving operational efficiency. However, he stated it will take time for AI to meaningfully translate into enhanced profits, with the primary focus currently on infrastructure development. The true benefits will emerge from companies effectively leveraging AI for cost reduction and accelerated growth.
