Will equity markets recover in FY27? Here's what Canara Robeco MF's CIO — Equities says
Foreign institutional investors, who have been massively selling in India's equity market will return when earnings start seeing a rebound, said Shridatta Bhandwaldar, CIO — Equities at Canara Robeco MF.
- Jun 12, 2026,
- Updated Jun 12, 2026 2:30 PM IST
Equity markets in India have been under pressure in 2026 on the back of massive selling by foreign portfolio investors amid the war in West Asia and worries of high oil prices and supply disruptions hurting India’s economy if the conflict prolongs. On Friday, June 12, markets traded higher tracking a global market rally on hopes that a truce between US and Iran may be around.
Still, year-to-date in 2026, the BSE Sensex has tumbled 12%, while the Nifty 50 has fallen over 10%, with the FPIs pulling out $30.5 billion as of June 11. This is significantly more than the $18.9 billion that they pulled out through the entire 2025 calendar year.
Shridatta Bhandwaldar, Chief Investment Officer — Equities, at Canara Robeco Mutual Fund, points to lacklustre earnings and high valuations as the key reasons behind the foreign investor sell-off and believes India will again be on the radar of FIIs when earnings growth rebounds.
“FIIs have a global canvas to play. On one hand if there are technology markets where the earnings growth is superior, on the other hand you have commodity markets which are very cheap and the earnings are recovering, the capital will naturally go there. We were expensive to start with and our earnings faltered,” Bhandwaldar told Business Today in an interaction.
Just as an investor won’t hold on to a company where she thinks earnings growth is not going to be good and valuation is expensive, it’s a similar case with foreign investors too, he notes, adding that Indian equity market will start looking good some time this year, as earnings will start recovering.
High oil prices and the disruptions caused by the conflict are expected to have an impact on corporate earnings, especially in the April-June quarter and maybe July-September. However, when the war stops, things will start to recover, he said.
“If war ends, we still see probably healthy double-digit earnings growth coming back in FY27 or on a rolling four-quarter basis,” according to Bhandwaldar.
He pointed that the cyclical downturn that we had seen in corporate earnings through FY25 and some part of FY26 had begun to turn aided by government efforts in terms of higher spending and consumption boost, before the war in West Asia erupted.
Following the market correction in the past over a year, Bhandwaldar says large cap stocks are no longer expensive, as they are now trading at last ten-year average valuations. However, that may still not be the case with mid and small caps.
Bhandwaldar remains bullish on large private sector lenders and is also overweight on pharmaceuticals, healthcare and telecom. The fund house also is positive on consumer discretionary, particularly automobiles. However, Bhandwaldar is cautious that if the war continues for longer, there will be some impact on the sector.
Over the past 12-18 months, even as the FIIs were relentlessly selling, there were steady inflows from domestic investors, particularly retail, where systematic investments have risen post COVID pandemic. Even in May 2026, SIP contributions stood at Rs 30,954 crore.
However, investor flows in equity mutual funds slowed sharply in May amid the market volatility. Inflows into equity MFs declined 40% month-on-month to Rs 22,907 crore, although they were still 20% higher year-on-year, according to data from Association of Mutual Funds of India.
Bhandwaldar said there have been some instances in the past too when for one or two months inflows have been lower, but they have picked up again. Therefore, it would be difficult to make a judgement on investor sentiment based on one month data. A trend he has observed is that when markets fall, some investor money comes in and when markets move up, there may be some profit booking.
“A lot of investors who would have entered the market in the last two years, their patience will get tested. Equity is not a linear asset class. You will have set of investors who will not be happy with their short-term outcomes. But, will that lead to a massive drawdown? I have my doubts, as lot of people who came in between 2020-2023 or earlier are still sitting on good double-digit CAGR returns,” he noted.
He stressed that equities should always be looked at from a long-term horizon and that in a tax-efficient manner, equity still was the best asset allocation incrementally for a lot of investors.
Equity markets in India have been under pressure in 2026 on the back of massive selling by foreign portfolio investors amid the war in West Asia and worries of high oil prices and supply disruptions hurting India’s economy if the conflict prolongs. On Friday, June 12, markets traded higher tracking a global market rally on hopes that a truce between US and Iran may be around.
Still, year-to-date in 2026, the BSE Sensex has tumbled 12%, while the Nifty 50 has fallen over 10%, with the FPIs pulling out $30.5 billion as of June 11. This is significantly more than the $18.9 billion that they pulled out through the entire 2025 calendar year.
Shridatta Bhandwaldar, Chief Investment Officer — Equities, at Canara Robeco Mutual Fund, points to lacklustre earnings and high valuations as the key reasons behind the foreign investor sell-off and believes India will again be on the radar of FIIs when earnings growth rebounds.
“FIIs have a global canvas to play. On one hand if there are technology markets where the earnings growth is superior, on the other hand you have commodity markets which are very cheap and the earnings are recovering, the capital will naturally go there. We were expensive to start with and our earnings faltered,” Bhandwaldar told Business Today in an interaction.
Just as an investor won’t hold on to a company where she thinks earnings growth is not going to be good and valuation is expensive, it’s a similar case with foreign investors too, he notes, adding that Indian equity market will start looking good some time this year, as earnings will start recovering.
High oil prices and the disruptions caused by the conflict are expected to have an impact on corporate earnings, especially in the April-June quarter and maybe July-September. However, when the war stops, things will start to recover, he said.
“If war ends, we still see probably healthy double-digit earnings growth coming back in FY27 or on a rolling four-quarter basis,” according to Bhandwaldar.
He pointed that the cyclical downturn that we had seen in corporate earnings through FY25 and some part of FY26 had begun to turn aided by government efforts in terms of higher spending and consumption boost, before the war in West Asia erupted.
Following the market correction in the past over a year, Bhandwaldar says large cap stocks are no longer expensive, as they are now trading at last ten-year average valuations. However, that may still not be the case with mid and small caps.
Bhandwaldar remains bullish on large private sector lenders and is also overweight on pharmaceuticals, healthcare and telecom. The fund house also is positive on consumer discretionary, particularly automobiles. However, Bhandwaldar is cautious that if the war continues for longer, there will be some impact on the sector.
Over the past 12-18 months, even as the FIIs were relentlessly selling, there were steady inflows from domestic investors, particularly retail, where systematic investments have risen post COVID pandemic. Even in May 2026, SIP contributions stood at Rs 30,954 crore.
However, investor flows in equity mutual funds slowed sharply in May amid the market volatility. Inflows into equity MFs declined 40% month-on-month to Rs 22,907 crore, although they were still 20% higher year-on-year, according to data from Association of Mutual Funds of India.
Bhandwaldar said there have been some instances in the past too when for one or two months inflows have been lower, but they have picked up again. Therefore, it would be difficult to make a judgement on investor sentiment based on one month data. A trend he has observed is that when markets fall, some investor money comes in and when markets move up, there may be some profit booking.
“A lot of investors who would have entered the market in the last two years, their patience will get tested. Equity is not a linear asset class. You will have set of investors who will not be happy with their short-term outcomes. But, will that lead to a massive drawdown? I have my doubts, as lot of people who came in between 2020-2023 or earlier are still sitting on good double-digit CAGR returns,” he noted.
He stressed that equities should always be looked at from a long-term horizon and that in a tax-efficient manner, equity still was the best asset allocation incrementally for a lot of investors.