10-15% Earnings Growth to Fuel Indian Equities in 2026: Franklin Templeton

Speaking to ANI, Franklin Templeton India, led by President Avinash Satwalekar, on Thursday, expressed a constructive outlook for Indian equities in 2026, driven by an expected recovery in corporate earnings, 10-15 per cent in 2026 and to improve further in 2027, after a "pretty rough going" year for Indian equity markets.

"Indian equity markets have had a pretty rough time for the last year. It's primarily been because we believe earnings growth has not come through at the same level. We expect earnings growth to come through 10-15 per cent in 2026 and then to accelerate in 2027," Satwalekar said.

Expressing optimism on the market in this year, he said," So, as earnings growth accelerates, we should start seeing the equity markets follow, and that's what we're expecting for 2026 to be a positive year," Satwalekar said.

He added that Indian equity markets have had a "pretty rough going for the last year," primarily because earnings growth "has not come through at the same level."

He said investor concerns in the short term remain a key headwind for the mutual fund industry, stressing that investments should be aligned with long-term financial goals rather than short-term returns.

"If you look at a 20-year, 30-year track record of the Indian markets, they have had tremendous returns," he said, questioning why investors focus on one- or two-year periods when goals such as children's education or retirement are long-term.

India's mutual fund penetration remains low, with only about 5 per cent of the population investing in mutual funds. Of a population of 140 crore, there are around 8 crore PAN holders, but only about 4 crore mutual fund investors, he said, highlighting the scope to expand the investor base.

Franklin Templeton India currently manages assets under management (AUM) of about Rs 1.26 lakh crore, more than double what it was four years ago. While the firm does not provide forward-looking targets, its goal is to grow in line with, or ahead of, overall industry growth, he said.

On alternative investments, Satwalekar said there has been increased appetite for products such as Alternative Investment Funds (AIFs) and private credit, particularly among high-net-worth investors.

"There has been an increase in appetite. Much of that is more focused on high-net-worth investors. There is opportunity sets, but there is a higher level of risk in those asset classes as well," he said.

"Private credit is something that has been around for a long time... you can get differentiated returns for the same risk levels."

In a volatile environment, he said, multi-asset and hybrid funds are becoming more relevant as they offer diversification across asset classes.

On trade, he noted that exports account for about 12 per cent of India's GDP, with around 2 per cent linked to the United States, limiting the GDP impact of trade deals.

However, he described the EU trade deal as "very good for India" as it opens sectors where India was not previously competitive.

Satwalekar also highlighted artificial intelligence (AI) as one of the most significant technological shifts since the internet, noting that the firm is already using AI across several functions to improve efficiency and productivity.

- ANI