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India's Retail Investors Face Uncertainty as Earnings Season Brings Risks and Rewards

 Indian retail equity investors are facing some uncertainty with the weakening of foreign portfolio flows and ongoing macroeconomic worries. However, retail investors invested a net Rs 20,534 crore into equity mutual fund schemes in March. 

The recent pause by the RBI’s Monetary Policy Committee, this week’s low CPI inflation print, and India’s brighter economic prospects are bringing hope to investors. However, some investors have cautioned that stock valuations are not factoring in the risk of negative surprises in earnings. In this regard, TCS and Infosys’s results were disappointing, and their management commentary was bleak, indicating that the software industry may face a slowdown. Nevertheless, sudden turns and twists in the global economy could mean an upward revision to estimates, which could entice buyers.

The effects of these results may be felt in different ways. For instance, a slowdown in hiring by one of the largest employers of India’s skilled and upwardly mobile workforce may not be good news for the consumption sector. 

Therefore, investors should remain cautious, and it is recommended that they wear their anything-is-possible cap as this earnings season moves forward. Falling raw material costs may be good news for agrochem companies, but the sales outlook is clouded due to global demand worries, a concern for stocks such as UPL.

Investors should also be kind to themselves in not being able to spot nasty surprises such as these. It may show up in the forthcoming quarters. There are no easy answers to the million-dollar question of what investors should do.

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