(Bloomberg) -- Having propelled the benchmark gauge almost 10% this week in a budget-driven rally, stock bulls in India are now counting on earnings to be the catalyst for the next leg up.The 34 NSE Nifty 50 Index members that have declared December-quarter results have posted a 34% jump in earnings from a year earlier, according to a note from local brokerage Kotak Securities Ltd. on Friday. With India’s daily new Covid-19 infections slowing and the vaccination drive gaining pace, analysts are betting on a stronger rebound in the economy and corporate profits in the months ahead.“Everything is in place - macro, policy, global backdrop,” said Gautam Duggad, head of research at Motilal Oswal Financial Services Ltd. “The market now just needs one thing to keep rallying -- earnings.”Rising optimism over earnings comes after the government unveiled a $500 billion spending plan in its budget on Feb. 1. That saw the benchmark Nifty 50 Index surge the most since April this week. The Reserve Bank of India raised its forecasts for economic growth on Friday, while assuring markets of ample liquidity to manage the government’s massive borrowing.READ: India’s Ambitious Budget Can Power Stocks Another 10% HigherForward EarningsThe cyclical rebound is starting to show.Materials have seen the biggest average earnings growth among sectors in the latest quarter, boosted by JSW Steel Ltd.’s profit and sales surge, data compiled by Bloomberg show. Strong loan growth at banks such as HDFC Bank Ltd., India’s largest private lender by assets, saw most of them beat estimates, even as they continued to set aside more money for bad loans.Forward earnings forecasts for Nifty 50 members have climbed by more than 25% from a low in July and are close to erasing their pandemic-induced slump. While the gauge is trading at its highest price-to-forward earnings ratio on record, market watchers are confident profits will catch up.This year, “forward earnings will grow much faster than market appreciation, so the PE multiples will come off,” Neelkanth Mishra, India strategist at Credit Suisse, said in a podcast. Earnings estimates will keep getting upgraded and “cyclicals can still outperform the rest of the market,” he added.The pro-growth budget has seen strategists from Morgan Stanley to Jefferies Financial Group Inc. adding to their bullish views on cyclicals.Earnings WrapAll five of India’s biggest technology companies beat earnings forecasts amid a global Covid-era shift toward digital servicesAutomakers made a comeback. Top carmaker Maruti Suzuki India Ltd. posted a 24% profit jump, thanks to recovering consumer demandProfits doubled at Sun Pharmaceutical Industries Ltd. and Cipla Ltd. as the health-care sector benefited from an uptick in prescriptions and doctor visitsWhile banks did well, insurance firms and shadow lenders had a tougher time reviving net interest income, with SBI Life Insurance Co. and Bajaj Finance Ltd. missing estimates. That weighed on the overall performance of the financial sectorMarket Chatter“We are optimistic on the economy and equities,” driven by the structural drivers of growth and strong demographics, said Amit Goel, a portfolio manager at Fidelity International. Sectors ranging from financials, infrastructure and real estate to automobiles and hospitals will benefit from the budget, he addedWhile the government has been relatively passive on demand-side stimulus, “consumption stocks are likely to benefit from the organic recovery within the economy,” said Amar Ambani, head of research - institutional equities at Yes Securities“I won’t be surprised if earnings compound at 25%+ for next two years,” said Hiren Ved, chief investment officer at Alchemy Capital Management. “We are positioned for everything that is digital and quality cyclicals,” he said, adding that the firm is also positive on mid-capsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.