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1QFY26 Preview: Strong markets to drive earnings growth

1QFY26 has been a strong quarter for equity markets with Nifty returning 8.5% and mid and small cap indices outperforming the Nifty. Resultantly, we expect the asset and wealth managers to report strong numbers. We expect AMCs under our coverage to report core revenues, operating PBT and PAT growth of 20%/23%/15% on YoY basis and 6%/5%/29% on QoQ basis. For wealth managers, we expect revenues/PAT growth of 20%/18% on YoY basis and 7%/7% on QoQ basis. Stocks have done well over the quarter with strong market sentiments, despite weakish net inflows and rangebound SIP inflows. With continued market share gains in equity segment, we continue to prefer Nippon Life AMC.

* Asset Management Companies: For 1QFY26, we expect all three AMCs – HDFC AMC, NAM, and UTI – to report strong QoQ growth in core revenue and earnings – 6.0%/8.0%/2.9% in revenue and 9.6%/30.1%/174% in PAT respectively. On a YoY basis, we expect PAT growth of +15.9%/+16.9%/+2.0% for HDFC AMC/NAM/UTI AMC. Post a sharp decline in broader indices during 4Q25 (-3.8%), overall Nifty 500 index has recovered strongly (+10.7%) led by surge in mid and small cap space in 1QFY26. Given continued prudence on costs in FY26, we expect profitability to fare well even if MTM gains plateau from hereon. We prefer Nippon Life AMC in this space given continued market share gain in equity segment.

* Wealth Management Companies: We expect wealth managers to post healthy growth even on a strong base as equity markets saw sharp rebound in 1QFY26 and on the back of organic and inorganic expansion (Capital markets and global and HNI segment for 360 ONE WAM; Asset services, Private Wealth and AMC businesses for Nuvama WM). We expect the companies to report stable earnings growth of 14.7%/3.2% QoQ and 17.7%/19.3% YoY for 360 ONE WAM/Nuvama WM in 1QFY26. For 360 ONE WAM, consolidation of around one month of earnings for B&K Securities will support P&L.

* Valuations and view: Strong 1Q implies higher AAUM (Average AUM) for asset and wealth managers, which would support earnings through the year. Hence, the stocks have given strong returns in 1Q buoyed by strong equity markets. However, another leg of rerating will come with a reset in inflows to that seen in second and third quarters of FY25. With continued market share gains in equity segment, we continue to prefer Nippon Life AMC at CMP.

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