Aetram Special Report - Sectoral & Macro Strategy View - 16.01.2026
Auto Sector Outlook | Structural Bullish Theme
1. Auto sector is positioned as a potential star performer this year, supported by healthy demand visibility across PVs, 2Ws, CVs, tractors, and exports.
2. Operating leverage is kicking in across OEMs and ancillaries, aided by stable input costs and better capacity utilisation.
3. Earnings momentum remains strong, with mid-20% YoY growth visibility driven by volume expansion and margin stability.
4. Premiumisation, SUV mix, exports, and GST-led demand normalisation add to sector resilience.
5. Despite selective valuation comfort, autos remain attractive due to tangible earnings delivery rather than narrative-driven optimism.
2. Operating leverage is kicking in across OEMs and ancillaries, aided by stable input costs and better capacity utilisation.
3. Earnings momentum remains strong, with mid-20% YoY growth visibility driven by volume expansion and margin stability.
4. Premiumisation, SUV mix, exports, and GST-led demand normalisation add to sector resilience.
5. Despite selective valuation comfort, autos remain attractive due to tangible earnings delivery rather than narrative-driven optimism.
Banking Sector View | Fundamentally Strong Cycle
1. Indian banks are currently in their strongest balance-sheet position in over 15 years.
2. Asset quality remains benign, capital buffers comfortable, and corporate deleveraging has structurally lowered credit risk.
3. Banks are entering an earnings acceleration phase from strength, not stress.
4. Net interest margins are stabilising, credit costs remain contained, and RoA is at an inflection point.
5. Medium-term setup is constructive, not euphoric, allowing scope for gradual valuation re-rating.
6. Stock selection remains critical, with divergence expected based on deposit strength and underwriting discipline.
2. Asset quality remains benign, capital buffers comfortable, and corporate deleveraging has structurally lowered credit risk.
3. Banks are entering an earnings acceleration phase from strength, not stress.
4. Net interest margins are stabilising, credit costs remain contained, and RoA is at an inflection point.
5. Medium-term setup is constructive, not euphoric, allowing scope for gradual valuation re-rating.
6. Stock selection remains critical, with divergence expected based on deposit strength and underwriting discipline.
Union Budget 2026 Expectations | Employment & Supply-Side Push
1. Budget is expected to focus on labour-intensive industries and large-scale job creation.
2. Sectors like textiles, leather, footwear, gems & jewellery, and handicrafts may see targeted support.
3. Expanded MSME schemes, better credit access, and infrastructure support for mid-sized enterprises are key expectations.
4. Alignment with new labour codes and supply-side reforms could strengthen India’s employment engine.
5. If executed well, this could be one of the most structurally impactful Budgets from a long-term growth perspective.
2. Sectors like textiles, leather, footwear, gems & jewellery, and handicrafts may see targeted support.
3. Expanded MSME schemes, better credit access, and infrastructure support for mid-sized enterprises are key expectations.
4. Alignment with new labour codes and supply-side reforms could strengthen India’s employment engine.
5. If executed well, this could be one of the most structurally impactful Budgets from a long-term growth perspective.
Global Risk Assessment | Noise, Not Structural Damage
1. Recent US actions around Venezuela are oil-leverage tactics, not a long-term supply shock.
2. Oil volatility reflects risk premium pricing rather than structural disruption.
3. Renewed Iran-related tensions are best viewed as negotiation tools, not immediate enforcement risks.
4. India’s direct exposure remains limited due to diversified crude sourcing and low trade dependence.
5. Primary impact is on sentiment and logistics costs, not core earnings trajectories.
2. Oil volatility reflects risk premium pricing rather than structural disruption.
3. Renewed Iran-related tensions are best viewed as negotiation tools, not immediate enforcement risks.
4. India’s direct exposure remains limited due to diversified crude sourcing and low trade dependence.
5. Primary impact is on sentiment and logistics costs, not core earnings trajectories.
Trade & Tariff Risk | Contained Impact
1. Proposed extreme tariff measures in the US remain low-probability outcomes.
2. Such proposals historically face legislative, legal, and business resistance.
3. Markets tend to discount them as negotiation tactics rather than executable policy.
4. Exporters may face short-term pressure, but broad-based earnings impact is unlikely.
5. Delay in US–India trade deal has added headline fatigue but limited market damage.
2. Such proposals historically face legislative, legal, and business resistance.
3. Markets tend to discount them as negotiation tactics rather than executable policy.
4. Exporters may face short-term pressure, but broad-based earnings impact is unlikely.
5. Delay in US–India trade deal has added headline fatigue but limited market damage.
FII Flow Perspective | Timing, Not Trust Issue
1. Current FII outflows are driven more by global allocation themes than India-specific fundamentals.
2. Capital is chasing AI-linked markets and reacting to global macro and geopolitical noise.
3. India remains relatively strong on domestic growth, policy support, and earnings visibility.
4. After sustained de-risking, India is already deeply under-owned.
5. As global headwinds fade and AI trade crowding normalises, FII flows are likely to return gradually, even before earnings fully reach mid-teens growth.
2. Capital is chasing AI-linked markets and reacting to global macro and geopolitical noise.
3. India remains relatively strong on domestic growth, policy support, and earnings visibility.
4. After sustained de-risking, India is already deeply under-owned.
5. As global headwinds fade and AI trade crowding normalises, FII flows are likely to return gradually, even before earnings fully reach mid-teens growth.
India–US Trade Deal | Worst-Case Scenario
1. Worst case would be prolonged delays or a narrow, incremental agreement.
2. This could keep select sectors exposed to periodic tariff-related headline risk.
3. Macro impact on India remains limited due to low export dependence on the US.
4. Strong domestic demand and policy support act as effective shock absorbers.
5. Historically, such frictions ease over time, allowing markets to refocus on earnings and growth.
2. This could keep select sectors exposed to periodic tariff-related headline risk.
3. Macro impact on India remains limited due to low export dependence on the US.
4. Strong domestic demand and policy support act as effective shock absorbers.
5. Historically, such frictions ease over time, allowing markets to refocus on earnings and growth.
NBFC Strategy | Selective, Not Broad-Based
1. Smaller NBFCs offer higher return potential but require sharp selectivity.
2. Opportunities exist in niche segments like MSME lending and small-ticket LAP.
3. Valuation asymmetry can reward well-run franchises with disciplined underwriting.
4. Risk profile remains higher due to rising competition and early stress signals in non-prime books.
5. Larger NBFCs offer stability and predictability but at more expensive valuations.
6. Strategy favours selective exposure to quality smaller NBFCs, not a blanket size-based call.
2. Opportunities exist in niche segments like MSME lending and small-ticket LAP.
3. Valuation asymmetry can reward well-run franchises with disciplined underwriting.
4. Risk profile remains higher due to rising competition and early stress signals in non-prime books.
5. Larger NBFCs offer stability and predictability but at more expensive valuations.
6. Strategy favours selective exposure to quality smaller NBFCs, not a blanket size-based call.
GST Rate Cuts | Earnings Inflection Catalyst
1. GST rate rationalisation can act as a structural earnings catalyst from Q3 onwards.
2. Short-term collection dips are typically followed by stronger volume-led growth.
3. Improved compliance and tax-base expansion support durable revenue recovery.
4. Lower GST eases working-capital pressure and supports operating leverage.
5. Q3 may mark the start of earnings inflection, with broader impact visible into Q4 and beyond.
2. Short-term collection dips are typically followed by stronger volume-led growth.
3. Improved compliance and tax-base expansion support durable revenue recovery.
4. Lower GST eases working-capital pressure and supports operating leverage.
5. Q3 may mark the start of earnings inflection, with broader impact visible into Q4 and beyond.
