Sustained Oil Price Hikes Biggest Threat to Corporate Earnings

As the September 2026 quarter earnings season approaches, Anupam Tiwari, Head of Equities at Groww Mutual Fund, highlights that sustained increases in crude oil prices pose the biggest risk to corporate earnings. Tiwari warns that higher energy costs could drive up inflation, strain fiscal positions, and squeeze corporate margins, ultimately dampening the broader earnings outlook. He emphasizes that any significant upward movement in equities will require a broad-based and sustained improvement in earnings.

Tiwari notes that while domestic liquidity has supported Indian equities, liquidity alone cannot sustain returns without strong earnings growth. The ongoing conflict in West Asia adds uncertainty, particularly due to India's reliance on imported energy. He also points out that prolonged periods of muted equity returns may lead investors to explore other asset classes like debt and precious metals, though he advises against short-term market-driven decisions.

Discussing earnings risks for FY27 and FY28, Tiwari identifies sustained oil price increases as the primary concern. Higher energy costs could weaken consumption, increase inflation, and reduce government capital expenditure, creating broader earnings headwinds. He also cautions that large-cap stocks may not be as cheap as perceived, with intensifying competition and lower R&D investments potentially pressuring valuations.

Tiwari remains optimistic about SIP flows, suggesting that disciplined investors may benefit from accumulating more units during subdued returns. However, he acknowledges that prolonged weak returns could moderate equity flows, with multi-asset and hybrid strategies gaining interest. He also advises caution with thematic funds, noting that strong structural themes do not always translate into attractive investment opportunities across all companies or valuations.