Latest news with #ETMarketsSmartTalk
Economic Times
10 hours ago
- Business
- Economic Times
ETMarkets Smart Talk: Axis Securities predicts Nifty could touch 27,600 in bull case by March 2026
In this edition of ETMarkets Smart Talk, we caught up with Neeraj Chadawar, Head of Fundamental and Quantitative Research at Axis Securities, to decode the market's direction for the rest of FY25 and beyond. With India's domestic growth trajectory holding strong despite global headwinds, Chadawar outlines why the Nifty 50 could scale up to 27,600 in a bull case scenario by March 2026. He shares insights on macro trends, policy moves, sector rotations, and why largecap, domestic-facing sectors are poised to lead the next leg of the market rally. Plus, his take on interest rates, rural revival, institutional flows, and what retail investors should do amid rising FOMO. Edited Excerpts – ADVERTISEMENT Q) Thanks for taking the time out. After a stable May, the market turned volatile in June. 1H2025 has been robust with Nifty closing in the red in just 2 out of the last 5 months; however, we still underperformed EM peers in 2025. How do you see markets in the medium-to-long term?A) Despite external risks, India's domestic growth trajectory remains intact, with key macroeconomic factors supporting a stronger FY26 versus FY25. Both the RBI and the government are providing support to the Indian economy through policy measures such as a 50 basis point CRR cut in December 2024, 100 basis points of rate cuts so far, improved bank liquidity, an additional 100 basis points CRR cut from September 2025 onwards, dividends from the RBI, a consumption boost provided in the budget, and an uptick in government Capex spending. Furthermore, macroeconomic uncertainty has reduced significantly over the last month. Most significant events are now behind us, with the majority of negative concerns regarding the domestic economy and earnings already factored into the forward, the market will closely monitor global developments around: 1) the U.S. government's policies, 2) the reciprocal tax, 3) further rate cuts by the U.S. Fed in 2025 (based on growth and inflation dynamics), and 4) the direction of currency and oil prices in the remaining part of 2025. ADVERTISEMENT These developments will continue to challenge market direction and valuations in the near term. Hence, we believe the market needs to navigate through another couple of months smoothly before entering into a concrete growth a result, we expect near-term consolidation in the market, with breadth remaining narrow in the immediate term. Our focus will remain on style and sector rotation, along with earnings recovery. ADVERTISEMENT Going forward, we expect the Indian market to be divided between domestic-facing and export-facing sectors, but the risk-reward balance would favor domestic-facing sectors due to the minimal to low impact of the reciprocal sectors will be in a wait-and-watch mode, and the impact and developments related to the reciprocal tax will be closely tracked. ADVERTISEMENT Based on the current development, we present 3 scenarios for the Nifty 50 by Mar'26:Bull Case: Nifty target of 27,600 by Mar'26, valued at 21x, assuming a Goldilocks scenario and private capex boostBase Case: Nifty target of 26,300 by Mar'26, valued at 20x on Mar'27 earnings (Recently, we have upgraded our Base case multiple to 20x from 19x earlier, supported by the favourable addition of high PE stocks in the index, in which Jio Financial and Eternal have replaced Britannia and BPCL). ADVERTISEMENT Bear Case: Nifty target of 22,300 by Mar'26, valued at 17x, assuming policy shifts, inflation challenges, and recession risks. Q) What is your take on the outcome of the MPC meeting in June? What is the trajectory you foresee for rates in 2025? A) It was a double delight from the RBI in Jun'25 MPC. The RBI's 50bps rate cut surprised markets, which expected a third straight 25bps cut. The regulator is in favour of front-loading rate cuts to support it has now changed its stance from Accommodative to Neutral, providing limited scope for further rate cuts. We believe any policy action on rates will be largely data-driven going RBI also surprised with a CRR cut of 100bps in four tranches, effective from Sep'25, which will provide more liquidity in the system, supporting credit growth for banks, (especially in H2FY26, which is characterised by the festive season).In BFSI, the pick-up in credit growth, which was subdued as banks exited FY25, remains are pinned on a recovery in H2FY26, supported by falling interest rates, consumption boost from the tax rate cut, expectations of a strong monsoon, and potential recovery in demand in the unsecured segments as stress subsides. Q) Which themes look attractive to you for the next 6-12 months amid trade war fears, a strong dollar and a possible scenario of falling interest rates? A) The valuations appear attractive for the Largecaps vs. the broader market, where the margin of safety is still this backdrop, we believe that the Largecap stocks, 'quality' stocks, monopolies, market leaders in their respective domains, and domestically-focused sectors may outperform the market in the near on the current developments, we 1) Continue to like and overweight Largecap private banks, telecom, consumption, hospitals, and interest-rate proxies,2) upgrading certain plays in retail consumption and FMCG sectors based on the recovery expectations in FY26, 3) prefer certain capex-oriented plays that look attractive in light of the recent price correction and reasonable growth visibility in the domestic market in FY26. Q) The IMD has predicted a normal monsoon in 2025 – do you see this supporting consumption stocks/auto stocks? A)Rural as a theme remains watchful for upcoming quarters based on the normal monsoon expectations, subdued inflation, and the pick-up in government spending. This theme has seen a long period of underperformance and may revive in FY26. It would also support entry-level 2-wheeler demand, which has lagged since Covid-19. Q) How do you see flows – FIIs have recently turned positive on Indian markets, while DIIs have supported the rally. Do you see a reversal of flows into Indian markets? A) FY26 is expected to present a more constructive environment for foreign flows compared to FY25, driven by improving domestic fundamentals in terms of earnings expectations and proactive policy of the earnings-related concerns are factored in FY25, and here onwards, the FY26 earnings prospects have improved will be supported by the RBI's liquidity support, including a CRR cut, the interest rate cut of 100 bps, which should support a recovery in corporate earnings in FY26, and a consumption-oriented Union said, global macro risks continue to warrant close attention. While India remains relatively better placed among emerging markets, foreign investors are likely to take a calibrated approach, balancing optimism around India's structural story with caution around global headwinds. Q) Is there any theme or sector where one should avoid fresh investments in the current environment? A) We continue to maintain underweight in export-oriented themes with a wait-and-watch approach and will closely monitor emerging developments related to the continue to maintain our underweight stance in the IT sector, as we foresee a slowdown in overall IT spending in the US market and a probable delay in discretionary spending, which may pose a downgrade risk in the upcoming quarters. Guidance and commentary remain critical for the sector going forward. Q) What is your call on the small & midcap space? Are they still trading at expensive valuations, and are large caps still a better play? A) The sector and style rotation will play a meaningful role in alpha generation going forward. The valuations appear attractive for the Largecaps vs. the broader market, where the margin of safety is still certain pockets in the Mid and Smallcap universe are looking attractive after the correction and the expectation of the earnings recovery in the near term, it will be a bottom-up stock picking market, and once we progress more towards FY26, more and more sectors are likely to join the rally based on the revival expectation of the domestic economic this backdrop, the broader market may deliver double-digit returns in the next one year. Q) Many investors who stayed on the sidelines at the beginning of 2025 and are now experiencing FOMO as markets have seen a significant rally, but it is still down by about 5% from the highs. Should they adopt staggered buying, keep cash or do a lump sum investment? A) We suggest staggered buying for the remaining part of FY26 with a 'Buy on Dips' strategy as the prospects for the domestic economy are slowly and gradually improving. Q) COVID cases are rising. Can this fuel hospital stocks, or should investors keep an eye on that theme? What are your views? A) We continue to like hospitals as a structural theme for the next couple of years, led by brownfield expansions, increasing insurance penetration, and the pick-up in medical tourism. All these factors are expected to remain sustainable over the next two to three years and will significantly drive the sector's growth. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
12 hours ago
- Business
- Time of India
ETMarkets Smart Talk: Axis Securities predicts Nifty could touch 27,600 in bull case by March 2026
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads In this edition of ETMarkets Smart Talk, we caught up with Neeraj Chadawar, Head of Fundamental and Quantitative Research at Axis Securities , to decode the market's direction for the rest of FY25 and India's domestic growth trajectory holding strong despite global headwinds, Chadawar outlines why the Nifty 50 could scale up to 27,600 in a bull case scenario by March shares insights on macro trends, policy moves, sector rotations, and why largecap, domestic-facing sectors are poised to lead the next leg of the market his take on interest rates, rural revival, institutional flows, and what retail investors should do amid rising FOMO. Edited Excerpts –A) Despite external risks, India's domestic growth trajectory remains intact, with key macroeconomic factors supporting a stronger FY26 versus the RBI and the government are providing support to the Indian economy through policy measures such as a 50 basis point CRR cut in December 2024, 100 basis points of rate cuts so far, improved bank liquidity, an additional 100 basis points CRR cut from September 2025 onwards, dividends from the RBI, a consumption boost provided in the budget, and an uptick in government Capex macroeconomic uncertainty has reduced significantly over the last month. Most significant events are now behind us, with the majority of negative concerns regarding the domestic economy and earnings already factored into the forward, the market will closely monitor global developments around: 1) the U.S. government's policies, 2) the reciprocal tax, 3) further rate cuts by the U.S. Fed in 2025 (based on growth and inflation dynamics), and 4) the direction of currency and oil prices in the remaining part of developments will continue to challenge market direction and valuations in the near term. Hence, we believe the market needs to navigate through another couple of months smoothly before entering into a concrete growth a result, we expect near-term consolidation in the market, with breadth remaining narrow in the immediate term. Our focus will remain on style and sector rotation, along with earnings forward, we expect the Indian market to be divided between domestic-facing and export-facing sectors, but the risk-reward balance would favor domestic-facing sectors due to the minimal to low impact of the reciprocal sectors will be in a wait-and-watch mode, and the impact and developments related to the reciprocal tax will be closely on the current development, we present 3 scenarios for the Nifty 50 by Mar'26:Bull Case: Nifty target of 27,600 by Mar'26, valued at 21x, assuming a Goldilocks scenario and private capex boostBase Case: Nifty target of 26,300 by Mar'26, valued at 20x on Mar'27 earnings (Recently, we have upgraded our Base case multiple to 20x from 19x earlier, supported by the favourable addition of high PE stocks in the index, in which Jio Financial and Eternal have replaced Britannia and BPCL).Bear Case: Nifty target of 22,300 by Mar'26, valued at 17x, assuming policy shifts, inflation challenges, and recession risks. MPC meeting in June? What is the trajectory you foresee for rates in 2025?A) It was a double delight from the RBI in Jun'25 MPC. The RBI's 50bps rate cut surprised markets, which expected a third straight 25bps cut. The regulator is in favour of front-loading rate cuts to support it has now changed its stance from Accommodative to Neutral, providing limited scope for further rate cuts. We believe any policy action on rates will be largely data-driven going RBI also surprised with a CRR cut of 100bps in four tranches, effective from Sep'25, which will provide more liquidity in the system, supporting credit growth for banks, (especially in H2FY26, which is characterised by the festive season).In BFSI, the pick-up in credit growth, which was subdued as banks exited FY25, remains are pinned on a recovery in H2FY26, supported by falling interest rates, consumption boost from the tax rate cut, expectations of a strong monsoon, and potential recovery in demand in the unsecured segments as stress subsides.A) The valuations appear attractive for the Largecaps vs. the broader market, where the margin of safety is still this backdrop, we believe that the Largecap stocks, 'quality' stocks, monopolies, market leaders in their respective domains, and domestically-focused sectors may outperform the market in the near on the current developments, we 1) Continue to like and overweight Largecap private banks, telecom, consumption, hospitals, and interest-rate proxies,2) upgrading certain plays in retail consumption and FMCG sectors based on the recovery expectations in FY26, 3) prefer certain capex-oriented plays that look attractive in light of the recent price correction and reasonable growth visibility in the domestic market in FY26.A)Rural as a theme remains watchful for upcoming quarters based on the normal monsoon expectations, subdued inflation, and the pick-up in government spending. This theme has seen a long period of underperformance and may revive in FY26. It would also support entry-level 2-wheeler demand, which has lagged since Covid-19.A) FY26 is expected to present a more constructive environment for foreign flows compared to FY25, driven by improving domestic fundamentals in terms of earnings expectations and proactive policy of the earnings-related concerns are factored in FY25, and here onwards, the FY26 earnings prospects have improved will be supported by the RBI's liquidity support, including a CRR cut, the interest rate cut of 100 bps, which should support a recovery in corporate earnings in FY26, and a consumption-oriented Union said, global macro risks continue to warrant close attention. While India remains relatively better placed among emerging markets, foreign investors are likely to take a calibrated approach, balancing optimism around India's structural story with caution around global headwinds.A) We continue to maintain underweight in export-oriented themes with a wait-and-watch approach and will closely monitor emerging developments related to the continue to maintain our underweight stance in the IT sector, as we foresee a slowdown in overall IT spending in the US market and a probable delay in discretionary spending, which may pose a downgrade risk in the upcoming quarters. Guidance and commentary remain critical for the sector going forward.A) The sector and style rotation will play a meaningful role in alpha generation going forward. The valuations appear attractive for the Largecaps vs. the broader market, where the margin of safety is still certain pockets in the Mid and Smallcap universe are looking attractive after the correction and the expectation of the earnings recovery in the near term, it will be a bottom-up stock picking market, and once we progress more towards FY26, more and more sectors are likely to join the rally based on the revival expectation of the domestic economic this backdrop, the broader market may deliver double-digit returns in the next one year.A) We suggest staggered buying for the remaining part of FY26 with a 'Buy on Dips' strategy as the prospects for the domestic economy are slowly and gradually improving.A) We continue to like hospitals as a structural theme for the next couple of years, led by brownfield expansions, increasing insurance penetration, and the pick-up in medical tourism. All these factors are expected to remain sustainable over the next two to three years and will significantly drive the sector's growth.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
4 days ago
- Business
- Time of India
ETMarkets Smart Talk - Missed the 2025 Rally? Don't chase—ease in with SIPs & structured debt: Puneet Sharma
In this edition of ETMarkets Smart Talk, Puneet Sharma , CEO & Fund Manager at Whitespace Alpha, offers a grounded perspective for investors navigating the post-rally landscape of 2025. While many are grappling with a fear of missing out ( FOMO ) after sitting on the sidelines during the market 's early surge, Sharma urges caution over emotion. Instead of chasing momentum, he advocates a disciplined, phased approach—leveraging SIPs and structured debt strategies to steadily build exposure without taking on unnecessary timing risks. Sharma also shares his views on market resilience, sectoral opportunities, and why domestic flows are now the backbone of Indian equities . Q) How do you see markets in the medium-to-long term? A) Honestly, the volatility in June doesn't worry me too much. It feels more like the market catching its breath after a fairly strong first half. If you look under the hood, India's still a domestic-demand-led story, and that engine's running steady. Other emerging markets have had a good run — partly thanks to currency moves and commodities — but we've had a more balanced, fundamentals-led path. From a medium- to long-term perspective, I'm still constructive. We're in the middle of an earnings cycle that's holding up well, domestic flows are steady, and with policy continuity now behind us, I think the market has more depth than it's being credited for. Short-term underperformance? It happens. But the long-term direction hasn't changed. Q) What's your view on the June MPC rate cut and what do you expect ahead? A) To be frank, the 50 bps cut was a bold but well-calibrated move. It sends a clear signal that the MPC is leaning into growth now that inflation is more under control. You could say they pre-empted global easing — which shows a certain confidence in our macro stability. That said, I don't think we're in for a deep rate-cutting cycle. Maybe one more cut, but after that, it's likely to be a wait-and-watch. If food inflation picks up due to patchy monsoons or crude spikes, the RBI will need to stay flexible. So, I'd say: calibrated, not aggressive — that's the path I see. Q) Which themes look attractive in this environment? A) What I find really interesting is how the old labels — like 'defensive' and 'cyclical' — are being redefined right now. The way I see it, three themes stand out: First, manufacturing exports — especially sectors like defense, capital goods, and engineering they're clear beneficiaries of the China+1 shift and global realignment. Second, rate-sensitive domestic sectors. Q) Will a normal monsoon support consumption and autos? A) Yes, and quite significantly — especially in rural-focused segments. A good monsoon tends to lift agri incomes and unlocks discretionary spending. Two-wheelers, tractors, even value-end appliances and staples — all stand to gain. We've already seen rural demand lagging a bit, so this could be a much-needed catalyst. That said, the devil is in the distribution — how the rain is spread and how it supports the kharif season will be key. So, cautiously optimistic, I'd say. Q) What's your take on flows — FIIs returning, DIIs staying strong? A) It's been good to see FIIs turning net positive again especially with political uncertainty behind us and rate expectations easing globally. But we have to acknowledge: FII flows are fluid. They'll react to global yields, oil prices, and the dollar. What gives me more confidence is the strength and resilience of domestic flows SIPs, long-only DIIs, pensions they're now the bedrock of this market. Unless there's a major global shock, I don't see a sharp reversal. India is no longer just a high-beta EM play we're increasingly being viewed as a strategic allocation. Q) Any sectors or themes to avoid right now? A) To be honest, we're a little cautious on commodities and global cyclicals, especially those tied to China's industrial cycle. Visibility is low and the risk-reward just doesn't look compelling. Also, some parts of the tech IPO pack still feel a bit ahead of themselves as valuations haven't quite aligned with profitability yet. The market's in a mood where it's rewarding stability and delivery. So we're avoiding names that are still built more on promise than actual performance. Q) Block deals and promoter selling — red flag or business as usual? A) I think we have to view it in context. Yes, there's been an uptick in block deals and some promoter selling, but in most cases, it's just portfolio rebalancing or estate planning after strong wealth creation. It becomes a concern only if it's paired with weak results or a change in governance tone and we haven't really seen that. In fact, most of these blocks are being picked up by long-term institutions, which speaks to the underlying confidence in those businesses. So right now, I'd say it's business as usual. Q) Small & midcaps vs large caps - where do you stand now? A) Valuations in the small and midcap space are definitely rich in parts. There's quality out there, no doubt, but you have to be selective. We're avoiding names where momentum has pushed price far ahead of fundamentals. Focused bets on companies with clean balance sheets and earnings visibility still make sense. On the other hand, large caps, especially in banks, capital goods, and industrials, are offering better relative value right now. A balanced allocation makes sense in this phase with a little more tilt toward quality large caps. Q) What's your advice for investors feeling FOMO after sitting out the early 2025 rally? A) To be honest, this happens every cycle. And the worst thing you can do is react emotionally. If you've missed the first leg of the rally, don't try to time the top or bottom staggered buying is your best friend here. SIPs, tranches, even simple discipline in allocation can help ease in without taking on timing risk. For those still uncertain about equity timing, allocating a portion to structured debt strategies can be a smart interim approach. It allows your capital to work earning steady, low-volatility returns while you gradually build exposure to equities with greater confidence.
Economic Times
4 days ago
- Business
- Economic Times
2H2025 market returns may moderate, but India's long-term story intact: Abhiram Eleswarapu
After a strong start to 2025, Indian equities have shown signs of volatility, raising questions about the sustainability of returns in the second half of the year. In this edition of ETMarkets Smart Talk, Abhiram Eleswarapu, Head of Equities at BNP Paribas, shares his insights on the market outlook, sector preferences, policy support, and valuation dynamics. While he expects market returns to moderate in the near term, Eleswarapu remains optimistic about India's long-term growth story, underpinned by improving liquidity, policy tailwinds, and resilient domestic demand. Edited Excerpts – ADVERTISEMENT Q) After a stable May, the market turned volatile in June. 1H2025 has been robust with Nifty closing in the red in just 2 out of the last 5 months; however, we still underperformed EM peers in 2025. How do you see markets in the medium-to-long term?A) India outperformed considerably in 2024 which partly explains part of the underperformance this year. By around September last year, valuations were no longer inexpensive, earnings forecasts started seeing moderate cuts, FPI outflows followed, and system liquidity went into deficit - a trend which continued into 1Q2025. However, since then, there have been several policy actions, first from the government via tax cuts, and then from the central bank via interest rate cuts and significant liquidity injections. Globally, news around tariffs has eased somewhat. After the recent market rally, valuations for large caps are back to above their historical system liquidity is strong and economic indicators are improving. Therefore, even as we think market returns may moderate in 2H, we would remain positive. ADVERTISEMENT Q) What is your take on the outcome of the MPC meeting in June. What is the trajectory you foresee for rates in 2025? A) The central bank frontloaded policy action via interest rate and CRR cuts in June, demonstrating its commitment to stimulating growth, the results of which will likely play out through the rest of the shift in stance to neutral suggests that the RBI may hold off on further rate reductions for now unless significant growth headwinds emerge. ADVERTISEMENT Inflation has notably decreased over the past few months, and core inflation appears to have already bottomed out. Q) Which themes look attractive to you for the next 6-12 months amid trade war ears, strong dollar and possible scenario of falling interest rates? Is there any theme or sector where one should avoid fresh investments in the current environment? What is your call on the small & midcap space? Are they still trading at expensive valuations, and are large caps still a better play? A) Our favored sectors include banking, IT services, telecommunications, discretionary consumption, and healthcare. We are more selective within mid- and small-cap stocks. ADVERTISEMENT Q) The IMD has predicted a normal monsoon in 2025 – do you see this supporting consumption stocks/auto stocks?A) A normal monsoon should further bolster the ongoing rural recovery. A healthy crop output and low inflation should boost farmers' disposable income, as long as realisations stay above their said, autos and consumption companies also derive a considerable proportion of their revenue from urban India and their valuations have already re-rated considerably. ADVERTISEMENT Q) Have you seen the recent trend of block deals taking place? Is that largely promoter selling? If yes, is that a worrying sign for stocks or is it business as usual?A) It is quite normal for promoters or private equity players to part with some of their holdings in a rising is worth noting we had a lull in activity for most of the year so far due to unsupportive markets, and several of these sales may have been pending from earlier. Q) How do you see flows – FIIs have recently turned positive on Indian markets, while DIIs have supported the rally. Do you see a reversal of flows into Indian markets? Many investors who stayed on the sidelines in the beginning of 2025 and are now experiencing FOMO as markets have seen a significant rally, but it is still down by about 5% from highs. Should they adopt staggered buying, keep cash or do a lump sum investment? A) It is true that domestic flows, primarily from SIPs, have held up quite well. We have now seen at least two months of improving FPI as mentioned earlier, valuations have also risen as a result since the bottom in 1Q. There it would be reasonable to expect more moderate returns going forward and to adopt a stock-specific approach. Q) COVID cases are rising. Can this fuel hospital stocks, or should investors keep an eye on that theme? What are your views? A) The initial feedback seems to be that the current cases are being driven by an Omicron subvariant, which typically causes only mild symptoms, and may not a catalyst for hospitals' earnings. That said, we continue to like those stocks from a long-term perspective. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
5 days ago
- Business
- Time of India
2H2025 market returns may moderate, but India's long-term story intact: Abhiram Eleswarapu
After a strong start to 2025, Indian equities have shown signs of volatility, raising questions about the sustainability of returns in the second half of the year. In this edition of ETMarkets Smart Talk, Abhiram Eleswarapu, Head of Equities at BNP Paribas , shares his insights on the market outlook, sector preferences, policy support, and valuation dynamics. While he expects market returns to moderate in the near term, Eleswarapu remains optimistic about India's long-term growth story, underpinned by improving liquidity, policy tailwinds, and resilient domestic demand. Edited Excerpts – Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Q) After a stable May, the market turned volatile in June. 1H2025 has been robust with Nifty closing in the red in just 2 out of the last 5 months; however, we still underperformed EM peers in 2025. How do you see markets in the medium-to-long term? by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Unlock full 2025 solar power in Philippines — install, maintain, upgrade Solar Panels | Search Ads Learn More Undo A) India outperformed considerably in 2024 which partly explains part of the underperformance this year. By around September last year, valuations were no longer inexpensive, earnings forecasts started seeing moderate cuts, FPI outflows followed, and system liquidity went into deficit - a trend which continued into 1Q2025. However, since then, there have been several policy actions, first from the government via tax cuts, and then from the central bank via interest rate cuts and significant liquidity injections. Globally, news around tariffs has eased somewhat. After the recent market rally, valuations for large caps are back to above their historical levels. Live Events But system liquidity is strong and economic indicators are improving. Therefore, even as we think market returns may moderate in 2H, we would remain positive. Q) What is your take on the outcome of the MPC meeting in June. What is the trajectory you foresee for rates in 2025? A) The central bank frontloaded policy action via interest rate and CRR cuts in June, demonstrating its commitment to stimulating growth, the results of which will likely play out through the rest of the year. The shift in stance to neutral suggests that the RBI may hold off on further rate reductions for now unless significant growth headwinds emerge. Inflation has notably decreased over the past few months, and core inflation appears to have already bottomed out. Q) Which themes look attractive to you for the next 6-12 months amid trade war ears, strong dollar and possible scenario of falling interest rates? Is there any theme or sector where one should avoid fresh investments in the current environment? What is your call on the small & midcap space? Are they still trading at expensive valuations, and are large caps still a better play? A) Our favored sectors include banking, IT services, telecommunications, discretionary consumption, and healthcare. We are more selective within mid- and small-cap stocks. Q) The IMD has predicted a normal monsoon in 2025 – do you see this supporting consumption stocks/auto stocks? A) A normal monsoon should further bolster the ongoing rural recovery. A healthy crop output and low inflation should boost farmers' disposable income, as long as realisations stay above their MSPs. That said, autos and consumption companies also derive a considerable proportion of their revenue from urban India and their valuations have already re-rated considerably. Q) Have you seen the recent trend of block deals taking place? Is that largely promoter selling? If yes, is that a worrying sign for stocks or is it business as usual? A) It is quite normal for promoters or private equity players to part with some of their holdings in a rising market. It is worth noting we had a lull in activity for most of the year so far due to unsupportive markets, and several of these sales may have been pending from earlier. Q) How do you see flows – FIIs have recently turned positive on Indian markets, while DIIs have supported the rally. Do you see a reversal of flows into Indian markets? Many investors who stayed on the sidelines in the beginning of 2025 and are now experiencing FOMO as markets have seen a significant rally, but it is still down by about 5% from highs. Should they adopt staggered buying, keep cash or do a lump sum investment? A) It is true that domestic flows, primarily from SIPs, have held up quite well. We have now seen at least two months of improving FPI inflows. However, as mentioned earlier, valuations have also risen as a result since the bottom in 1Q. There it would be reasonable to expect more moderate returns going forward and to adopt a stock-specific approach. Q) COVID cases are rising. Can this fuel hospital stocks, or should investors keep an eye on that theme? What are your views? A) The initial feedback seems to be that the current cases are being driven by an Omicron subvariant, which typically causes only mild symptoms, and may not a catalyst for hospitals' earnings. That said, we continue to like those stocks from a long-term perspective.
