Capitalmind CEO Deepak Shenoy Flags Banks and Term Insurers as 90% Earnings Beat Forecasts

Commercial lenders are set to capture the lion's share of fresh revenue as merchant discount rates take root across digital payment rails.

Net income gains will skew heavily toward traditional retail banks rather than pure-play digital payment platforms, according to portfolio assessment by Capitalmind Mutual Fund. Regulatory changes across distribution compensation are simultaneously opening high-margin avenues for life insurers, while corporate earnings—now roughly 90% reported—continue to outstrip consensus forecasts across key industrial segments.

"Cash is really the only other alternative," said Deepak Shenoy, Chief Executive Officer of Capitalmind Mutual Fund. "If you have to move away from UPI, cash is cumbersome."

Merchant Fees Skew Revenue Toward Tier-1 Commercial Banks

Banks hold the operational high ground in the Unified Payments Interface ecosystem. While merchant discount rates (MDR) introduce a long-awaited monetisation stream for digital payment rails, the proceeds do not split down the middle. Commercial banks maintain the settlement accounts, clear the interbank traffic, and directly absorb the largest share of transactional merchant fees.

Listed fintech aggregators face a different balance sheet calculus. Non-bank platforms carry high merchant acquisition costs and merchant servicing expenses, meaning net operational earnings yield slower percentage gains compared to major balance-sheet lenders. The fee structure isolates smaller shopkeepers: an estimated 96% of micro-merchant transactions escape charges entirely, focusing the toll strictly on transactions over ₹2,000.

Counterparty pushback remains minimal. Merchants face a stark operational choice: absorb fractional transactional expenses or retreat to paper cash logistics. Managing physical currency brings operational theft risk, physical accounting drag, and deposit delays. For retail merchants, handling physical paper remains far more expensive than paying a controlled digital settlement rate.

Intermediary Payout Caps Realign Insurance Margins

Sweeping restrictions on payouts to insurance distributors are shifting pricing leverage back to underwriters. For years, insurance distribution partners commanded heavy commissions alongside disguised supplemental marketing payouts that drove up operational expense ratios. Clamping down on these intermediary incentives hands direct control over balance-sheet management expenses back to life insurance boards.

Companies with dedicated in-house sales forces stand to gain immediate operational efficiency over aggregators reliant on third-party broker networks. The structural upside, however, divides sharply along product lines. Health insurance remains ensnared in protracted tariff disputes with private hospital networks over claims and diagnostic pricing.

Term insurance presents the real earnings engine.

"Term insurance is where a lot of profits can come from because the economics generally work better for them," Shenoy said. The product line operates on low penetration rates, high underwriting margins, and sizable policy tenures. As distributors adjust to standardized sales economics, term-heavy books offer carriers substantial margin expansion compared to heavily contested motor and medi-claim lines.

Market Context: The regulatory reshaping of financial distribution reflects a decisive tilt toward primary risk underwriters and settlement bankers. By restricting excessive intermediary rent-seeking in insurance and establishing sustainable transactional fees in digital payments, balance-sheet allocators are gaining margin supremacy over asset-light brokers.

Industrial Balance Sheets and Drugmakers Lead 90% Earnings Sweep

Corporate India's latest reporting cycle delivered upside surprises across domestic cyclical sectors. With approximately 90% of listed corporate scorecards published, aggregate profit numbers pushed comfortably past pre-earnings models. Market strength, however, has concentrated into distinct pockets rather than spreading evenly across mid-tier consumption.

Pharmaceutical manufacturers, heavy industrial fabricators, and commercial balance-sheet lenders drove the bulk of operating beats. Drugmakers gained from rationalised raw material inputs and export stabilisations, while engineering order books mirrored sustained state capital expenditure outlays. The divergence penalises consumer companies lacking pricing power while rewarding capital goods producers and well-funded deposit franchises.

Financial markets now face the final slate of earnings declarations and impending operational rollouts of merchant charge updates. Institutional allocations are positioning for full-year operational updates, where underwriter management expense ratios and digital transaction fee accretions will face their first true quarterly test.