In today’s global financial landscape, markets are increasingly being driven by liquidity flows, geopolitical uncertainty and central bank signals rather than just corporate performance. From shifting interest rate expectations in the US to ongoing geopolitical tensions and AI-led disruption in sectors like technology, investors are navigating one of the most complex environments in recent history.

Amid this noise, one timeless principle is regaining relevance: don’t blindly trust brokerages, focus on the quality of earnings.

The structural bias in brokerage recommendations

Veteran investor Thornton O’Glove has long warned investors, in a presentation at Talks at Google, about the inherent conflict of interest in brokerage research. Analysts, often tied to investment banking relationships, are incentivised to maintain positive coverage on companies.

In simple terms, the system is designed to promote optimism. Negative calls risk damaging relationships with corporate management and jeopardising lucrative deals such as underwriting or advisory mandates.

In a bull market, this bias goes unnoticed. But in volatile environments like today, where global liquidity is tightening and growth expectations are uncertain, it can become dangerous.

Why earnings quality matters more than ever

Markets may react to earnings headlines, but valuations are ultimately determined by the quality of those earnings, not just the numbers themselves.
This distinction is critical in the current cycle:

• Companies are increasingly using one-off gains, cost-cutting or accounting adjustments to meet expectations.
• AI-driven efficiency is boosting margins in the short term, but sustainability remains unclear.
• Global demand cycles are uneven, making revenue growth less reliable.

O’Glove emphasises that investors must look beyond reported profits and examine whether earnings are recurring, cash-backed and operationally driven.

Red flags hidden in plain sight

In an era of information overload, the most important signals are often buried in financial statements. Some key warning signs include:

1. Non-recurring gains masking weak operations
   A rise in profits driven by asset sales or accounting adjustments is not sustainable.
2. Divergence between cash flow and earnings
   If profits rise but cash flow does not, it may indicate aggressive accounting.
3. Overly optimistic management commentary
   Management narratives in annual reports can paint a rosy picture, even when underlying numbers deteriorate.
4. Dependency on few customers or segments
   A concentration of revenue sources increases vulnerability, especially in a slowing global economy.

Global context: Why this advice is timely now

The importance of earnings quality becomes sharper in the current macro backdrop:

• Central banks remain unpredictable: Interest rate cycles are still evolving, affecting liquidity and valuations.
• AI disruption is reshaping industries: Profitability improvements may be temporary as competition intensifies.
• Geopolitical risks persist: Supply chains and global demand remain fragile.
• Market concentration is rising: A few large companies are driving indices, masking broader weakness.

In such an environment, headline earnings can be misleading. What matters is how those earnings are generated and whether they can sustain through cycles.

Beyond numbers: Reading between the lines

Modern investing is no longer just about analysing balance sheets, it is about interpreting narratives.

Quarterly earnings calls, for instance, often reveal subtle cues:

• A cautious tone from management may signal future headwinds.
• Frequent use of terms like “challenging environment” can indicate underlying stress.
• Defensive language around guidance may hint at volatility ahead.

Investors who pay attention to these nuances gain an edge over those relying solely on broker reports.

The real edge: Independent thinking

The biggest takeaway from O’Glove’s philosophy is simple: independent analysis beats consensus thinking.

While brokerage reports provide a starting point, they should never be the final basis for investment decisions. Instead, investors should:

• Study financial statements in detail
• Compare management commentary with actual numbers
• Track trends across multiple quarters
• Focus on cash flows, margins and sustainability

Conclusion: In a noisy market, quality is clarity

As global markets oscillate between optimism and fear, the temptation to rely on expert opinions is stronger than ever. But history shows that the best investors are those who question consensus and dig deeper.

In today’s uncertain world, where liquidity, geopolitics and technology are reshaping market dynamics, quality of earnings is not just a metric, it is a survival tool.

Because in the end, markets may reward stories in the short term, but they always revert to fundamentals.

Nifty ended with gains on Friday, led by strong buying action in consumer and metal stocks. The index extended its gains for the second straight week, closing above the 24,300 mark.

Nilesh Jain, Vice President, Head of Technical and Derivative research at Centrum Finverse, said the immediate hurdle is seen at the 50-DMA, placed around 24,410, and a decisive breakout above this level could pave the way for an upside move towards 24,700. The overall structure remains positive, favouring a buy-on-dips approach, with the support base now shifting higher to around 24,000, he added. “Momentum indicators and oscillators continue to reflect strength, as the RSI sustains above the 55 level. Meanwhile, the volatility index has continued to soften, hovering near the 17 mark. Any further decline in volatility is likely to lend additional support to the ongoing bullish sentiment,” Jain said.

Here are 2 stocks to buy:

Buy Shipping Corporation at Rs 305-309 | Upside: 29% | Stop Loss: Rs 270 | Target: Rs 400

Shipping Corporation of India has witnessed a strong breakout from an ascending triangle pattern, supported by a sharp surge in volumes, indicating institutional participation. RSI is near 53 and trending upwards, reflecting improving momentum without overbought conditions. The breakout above Rs 300 marks a bullish shift, with immediate resistance near Rs 345. Key support is placed at Rs 270. The stock is likely to head towards Rs 340–Rs 360 in the short term, maintaining a positive bias.

(Kunal Kamble, Sr. Technical Research Analyst, Bonanza Portfolio)

Buy Power Grid at Rs 318-320 | Upside: 9% | Stop Loss: 295 | Target: 350

Power Grid Corporation has broken out of a consolidation range near Rs 305 – Rs 310, supported by a steady rise in volumes, which indicates accumulation. RSI is around 54 and trending higher, reflecting strengthening momentum without overbought conditions. The breakout signals a positive bias, with immediate resistance seen near Rs 330–Rs 340, while key support is placed at Rs 295. The stock is likely to move towards Rs 335–Rs 350 in the short term.

(Kunal Kamble, Sr. Technical Research Analyst, Bonanza Portfolio)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Aluminium prices have surged to four-year highs on the London Metal Exchange (LME) and touched a record ₹375/kg in India. After the onset of the US–Iran war in early March, prices initially fell sharply due to panic selling and risk aversion. However, the market quickly recovered as supply concerns and strong demand reasserted themselves, pushing prices to all-time highs. This rebound highlights aluminium’s sensitivity to geopolitical shocks and its resilience when fundamentals remain strong. The volatility underscores the importance of monitoring both global macroeconomic factors and regional supply chains.

Factors Driving Prices

Several factors are driving aluminium higher. First, strong demand from the construction, automotive, and packaging sectors has kept consumption robust. Second, supply disruptions in key producing regions have tightened availability. Third, speculative interest has increased as investors seek commodities that hedge against inflation. Additionally, higher energy costs have raised production expenses, feeding into price escalation. Together, these elements create a perfect storm of bullish sentiment. The combination of resilient demand and constrained supply has made aluminium one of the standout performers in the metals complex this year.

Global Supply–Demand Scenario

Globally, aluminium supply is under pressure. Major producers face rising energy costs and stricter environmental regulations, limiting output growth. Demand, however, remains strong, particularly in Asia, where infrastructure projects and industrial expansion continue at a pace. The mismatch between supply and demand has widened, creating upward pressure on prices. Inventories are not sufficient to cushion the imbalance, and the market is increasingly reliant on Chinese output. This structural tightness suggests that prices will remain elevated unless new capacity comes online or demand slows significantly.

Impact of Middle East Tensions

The increased tensions in the Middle East have indirectly impacted aluminium supply. While the region is not a major aluminium producer, geopolitical instability has disrupted trade flows and heightened investor anxiety. Shipping routes and energy markets are vulnerable to conflict, which in turn affects the cost and reliability of raw material supply chains. The uncertainty has added a risk premium to aluminium prices, as markets anticipate potential disruptions in global logistics and energy availability. Thus, Middle East tensions amplify volatility even without direct production losses.

Role of Higher Oil Prices

Aluminium smelting is highly energy-intensive, requiring vast amounts of electricity. Rising oil prices have driven up energy costs globally, indirectly increasing the cost of power generation. This has made aluminium production more expensive, particularly in regions reliant on fossil fuels. Producers pass these costs onto the market, contributing to higher prices. The link between oil and aluminium is therefore significant: as energy costs rise, so does the marginal cost of smelting. This dynamic reinforces aluminium’s sensitivity to broader energy market trends.

Warehouse Stock Situations

Warehouse stocks in both the LME and Shanghai have been declining, reflecting strong demand and limited supply. Lower inventories reduce the buffer against market shocks, making prices more volatile. Traders closely monitor stock levels as an indicator of market tightness. The drawdown in stocks suggests that consumption is outpacing production, and replenishment is slow. This situation has added to bullish sentiment, as tight inventories often precede further price increases. The lack of adequate stockpiles is a key driver of current record highs.

Demand from China

China remains the largest consumer of aluminium, accounting for more than half of global demand. Its appetite is driven by infrastructure projects, electric vehicles, and renewable energy initiatives, all of which require significant aluminium inputs. Recent stimulus measures have further boosted consumption, keeping demand elevated. China’s role is pivotal: any slowdown or acceleration in its economy directly impacts global aluminium prices. Current trends suggest continued strong demand, reinforcing the bullish outlook for the metal in the near term.

US Armoury Demand

The US defence sector may add incremental demand for aluminium in the coming months. Military applications, including armoury and aerospace, rely heavily on aluminium for its strength-to-weight ratio. Rising geopolitical tensions and increased defence spending could translate into higher consumption. While this demand is smaller compared to industrial uses, it adds another layer of support to the market. The prospect of heightened military requirements underscores aluminium’s strategic importance beyond civilian industries.

Outlook for 2026

For the rest of the year, aluminium prices are expected to remain elevated, supported by strong demand and constrained supply. Volatility will persist due to geopolitical risks, energy market fluctuations, and speculative activity. If oil prices stay high and inventories remain tight, aluminium could sustain record levels. However, any slowdown in China’s economy or easing of geopolitical tensions may temper the rally. Overall, the balance of risks suggests a firm market with potential for further gains, making aluminium a key focus for investors and industries alike.

(The author is Hareesh V, Head of Commodity Research, Geojit Investments Limited)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times.)