Speaking to ET Now, Matthews struck an optimistic tone on earnings, even as global markets grapple with volatility and shifting narratives from Wall Street. He believes the real story for India lies not in headline-driven rallies, but in the gradual payoff from policy actions already taken.
“Well, I suppose the most recent GDP was one, but most of the data has not happened yet. It takes a while for the fiscal and monetary stimulus that was put into place this year to trickle through into the economy, so I think that will happen and that is the basis for our high teens earnings growth projection for fiscal year 27,” Matthews said, reiterating his expectation of 16–18% earnings growth by FY27.
Global jitters, India’s relative comfort
The global backdrop, however, remains anything but calm. Volatility from the US has spilled over into other markets, amplified by renewed political commentary and lingering questions around the sustainability of the artificial intelligence boom. Matthews pointed out that since late October, US markets have faced pressure from concerns around AI valuations and the sheer scale of investment required in data centres. Interestingly, he believes this dynamic may work in India’s favour.
“In the United States since late October, there has been a drag on the market from the whole artificial intelligence story… and that in a strange way helps India because one of the negatives for India this year was it has no artificial intelligence story,” he noted. While India lacks a direct AI heavyweight comparable to US hyperscalers, that absence could turn into an advantage as investors reassess concentration risks in American tech giants. Looking ahead to 2026, Matthews feels India could emerge as a natural diversification destination. “India would stand out to me as a good place to diversify to get more cyclical exposure,” he said, adding that globally, cyclicals have been under-owned, underperforming and undervalued for an extended period.
Cyclicals: more than just banks
Within India, Matthews stressed that the cyclical opportunity is far broader than the usual banking plays. While banks have already delivered solid returns, other segments still offer room to grow.
“NBFCs can do well and the energy space is cyclical and materials — those are places that I think are definitely worth looking at this year,” he said, pointing out that these areas have lagged US technology stocks and could benefit if global investors rotate towards value and cyclicality.
Returns driven by earnings, not rerating
On the question of whether India’s potential returns depend on foreign flows or valuation expansion, Matthews was clear. He is not banking on a rerating.
“No, I do not expect a valuation rerating for India. But the good news is that it is in line with its long-term average on around 21 times forward earnings,” he explained. If earnings grow at the projected 17%, markets could deliver similar returns while valuations remain stable.
China, meanwhile, continues to draw attention within emerging markets, but Matthews believes its strong run could push investors to look elsewhere. India, having lagged this year, could come back onto global radar screens for that very reason.
He also flagged an important potential shift in China’s currency stance. “There are more and more voices in China… that they should allow their currency to appreciate,” Matthews said, arguing that a stronger renminbi would ease trade tensions, support Chinese consumers and act as a tailwind for the broader emerging market universe.
If that scenario plays out, India stands to benefit as part of a wider emerging market upswing — not through hype, but through fundamentals.
In a year that may lack drama, India’s markets could still quietly deliver, rewarding patience with earnings-led growth rather than headline-grabbing rallies.
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