Economic revival, consumption boost and smallcap turnaround: Varun Goel sees broad-based market optimism

Even as Indian equities remain range-bound with the Nifty slipping nearly 1% for the week, optimism about the broader economy and earnings revival is building up. According to Varun Goel, Head of Investments at Nippon India Mutual Fund, the current earnings season has been “in line or slightly ahead of expectations,” setting the stage for a potential turnaround across sectors.

“For FY26, there is clearly an economic uptick that we are seeing. Thanks to the three lakh crores of tax cuts, a significant revival in central government infrastructure spending, and a very supportive and accommodative monetary policy, these three things should take the economic growth closer to 7% this year,” Goel told ET Now.

He highlighted that after four quarters of downgrades, this is the first quarter showing early signs of earnings improvement — especially in the small and midcap space. “We are beginning to see earnings getting better. And as far as the small and the midcap space is concerned, the turnaround may be even better there,” he said.

Goel also emphasised a realistic approach to market expectations. “If we look at the 30-year average earnings growth for Nifty 50, that has been more like 11 odd percent, and if you see the returns, that has also been more or less on those lines,” he said, adding that markets typically mirror earnings trends.

On the consumption outlook, Goel expects a strong revival driven by fiscal support. “As far as discretionary consumption is concerned, that will definitely get a boost from the one lakh crores of tax cuts, two lakh crores of GST cuts, and then the third instalment of that will be the eighth pay commission,” he said, identifying autos, appliances, and travel as key beneficiaries.

He remains constructive on real estate and metals, citing favourable policy support and steady demand. “We remain constructive in the sector as a whole… safeguard duties in India will ensure that the profitability of some of the steel companies will remain quite robust,” Goel noted.Also read: IPO frenzy turning murky amid lack of transparency, says market veteran Sandip SabharwalLooking ahead, Goel expects stable inflation, strong GDP growth, and a revival in smallcap earnings to drive sentiment. “The bigger turnaround seems to be in the smallcap space… we are expecting a complete turnaround with the plus 15% plus kind of earnings growth,” he added.