West Asia conflict to prolong earnings recovery cycle, but worst is over: Gaurav Dua of Standard Chartered Securities

India Inc.’s earnings recovery will take longer than expected as higher energy prices amid the West Asia conflict could squeeze margins, according to the investment head of Standard Chartered Securities (India).“The consensus about a month back was building around 14-15% kind of (earnings) growth, which might come to low double-digits because of these changes in the input cost,” said Gaurav Dua, chief investment officer at the broking firm.For a year and a half, India Inc has been in an earnings downgrade cycle that was expected to bottom out, Dua said. But the rising energy prices could prolong the recovery, he said.

“Despite this, we believe that the worst of the cycle is now behind us.” Edited excerpts:Annual 10-12% pullbacks are normal and occur every year; in hindsight, these dips from recent highs are actually investment opportunities. Most investors fail by trying to time the market, which results in them not being optimally invested.

Looking at the decade from 2016 to 2025, despite major domestic and global events like demonetization, goods and services tax (GST), bank non-performing assets (NPAs), the IL&FS fiasco, Covid and various wars, the Nifty has consistently ended in the green. The market delivered a 13% CAGR during this period, proving that time spent in equity markets is more important than trying to time the market.In a growing market like India, active funds have the scope to outperform indices and create alpha for investors.

However, there is also growing interest in passive investments, which now contribute around 14% to 15% of equity assets under management (AUM). This represents a substantial exposure, indicating demand for both types of products.There is never a fixed template investment.