Home / Business and Economy / Macro Cycles Drive Returns: Shankar Sharma Explains
Macro Cycles Drive Returns: Shankar Sharma Explains
22 Nov
Summary
- Investment success hinges on timing market macro cycles, not just stock selection.
- Most investor gains in the last 4-5 years were driven by macro tailwinds.
- Strong earnings growth seen in 2QFY26, with specific sectors showing upgrades.
Timing the broader economic cycle is paramount for investment success, according to Shankar Sharma, founder of GQuant FinXray. He asserts that the majority of investor returns are fundamentally driven by market trends, making macro cycle timing essential. Sharma highlights that the period from 2014 to 2020 offered poor returns due to a lack of macro tailwinds, with substantial gains only materializing in the last four to five years. This period saw abysmal GDP growth and disappointing corporate earnings.
Recent financial data indicates that Nifty has delivered 102% returns over the past five years, while broader markets like Nifty Midcap 100 and Smallcap 100 saw even higher returns. The recently concluded earnings season for Q2FY26 showed lower downgrades, with marginal revisions in Nifty 50 estimates. Notably, sectors such as autos, capital goods, and financial services experienced upward revisions in profit estimates.
Conversely, building materials and energy sectors faced downgrades due to lower realizations and revenue growth. Motilal Oswal reported a healthy double-digit earnings growth for the Nifty-500 universe in 2QFY26, the highest in five quarters, despite economic headwinds. This growth was particularly strong for financials, excluding metals and oil & gas.
