Trade deal hopes can boost mood, but earnings matter more: BofA’s Arbind Maheswari

Arbind Maheswari, Head of India Equities at BofA Securities, said progress in India-US trade talks could support market sentiment, but long-term gains will depend on growth and company earnings.He said recent comments by the US ambassador on progress in discussions were a positive sign. Maheswari described the situation as a “disagreement between friends” and said a deal, if reached, would be a “big sentiment boost” for markets.

However, he said sustainable returns depend more on economic performance and profits. According to him, India’s corporate earnings are likely to recover after a period of slow growth. BofA expects earnings to grow by about 14% this year, which could support a Nifty return of around 12%, mainly driven by profits rather than higher valuations.

Also Read | Market crises are becoming more frequent and that’s not bad news, says HDFC AMC’s SetalvadMaheswari noted that market valuations are already above long-term averages, limiting the scope for gains from re-rating. “Earnings growth is what is going to drive Nifty returns this year,” he said.

On foreign investors, Maheswari said global funds continue to prefer markets with strong exposure to themes such as artificial intelligence (AI) and semiconductors, including Korea, Taiwan and Japan. India, he said, offers limited listed exposure to these areas, which has contributed to recent underperformance.

Still, he expects the pressure from foreign selling to ease. With possible US rate cuts and a weaker dollar, he said emerging markets could see improved flows. BofA’s base case is that foreign outflows from India will stop and may turn into small inflows later this year.Also Read | Large caps offer better risk-reward than small caps, says Aditya Birla Sun Life AMC’s Harish Krishnan

On the domestic economy, Maheswari said past rate cuts, tax changes and an upcoming government pay hike should support consumption over time. He also expects further policy steps in the February budget to support growth.

In terms of sectors, he said areas with better earnings visibility include financials and rate-sensitive cyclicals. He added that wider earnings growth across sectors may take longer and could be more visible in fiscal year 2026-27 (FY27).

Maheswari also spoke about the impact of artificial intelligence on banks and lenders. He said AI is already helping improve efficiency, but it will take time before it has a meaningful effect on profits. The focus so far has been on building infrastructure, while the real benefits will come from companies that can use AI to cut costs and grow faster.

For the full interview, watch the accompanying video

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