He, however, sees no scope for a runaway rally of above 15%. In an interview with Mint, Vijayakumar says India is in a Goldilocks setting from the domestic economic perspective and expects earnings growth of around 15% in FY27. Edited excerpts:
How do you see market performance in 2025? What were the key learnings for you?
Our view early this year was to expect only modest returns in 2025. The elevated valuations and pedestrian earnings growth didn't provide a favourable setting for a smart rally delivering superior returns like in 2021-24.
The significant feature of the market performance in 2025 was India's huge underperformance vis-à-vis other markets.
The key learning was the realisation of the need for geographical diversification to hedge against possible underperformance. And also, given the spectacular returns delivered by precious metals, a multi-asset investment strategy is important.
Do you expect the market's performance to be better in 2026 than in 2025?
The market's performance in 2026 is likely to be better than in 2025. Fundamentals favour a rally delivering decent returns, say, around 12 to 15%. But there is no scope for a runaway rally that can deliver returns above 15%.
What is your projection for Q3 earnings? What factors can drive earnings in calendar year 2026?
Q3 FY26 earnings can slowly accelerate. The GST cuts, which came into effect from late September, have boosted demand for segments like automobiles and white goods.
Profit growth will be led by automobiles, which have done well in Q3, benefiting from the GST cuts on automobiles.
This will lead to rising revenue and a disproportionate rise in profits arising from operational leverage.
Credit growth is picking up in response to the rate cuts and liquidity infusion.
This augurs well for financials, particularly since their NPAs are at record lows and balance sheets are robust. Segments like telecom, hotels and travel will do well.
Overall, Q3 earnings have the potential to grow at low double digits.
How can an India-US trade deal impact the economy and the market?
An India-US trade deal is an essential requirement for the economy and markets to move ahead.
Despite the Trump tariffs, the economy has done well and is likely to achieve around 7.3% growth in FY26.
Even though this is a commendable achievement, the tariffs have impacted jobs in labour-intensive sectors like textiles, gems and jewellery, marine processing and leather products.
The high trade deficit has impacted the rupee, making it the worst-performing currency in Asia, which, in turn, aggravated the FPI outflows from India.
To stem the tide of rupee depreciation, FPI outflows, and the weakening jobs market, we need an India-US trade deal. This is expected in early 2026.
A deal will be a big relief from an economic perspective, and it can prove to be a shot in the arm for markets if India succeeds in getting favourable tariffs.
Why are FIIs not buying even though large-cap valuations look reasonable?
The dominant feature of 2026 was the AI trade, which benefited 'AI winners' like the US, China, South Korea and Taiwan.
India, widely regarded as an 'AI loser', lost out in this AI trade, which witnessed sustained FII selling in non-AI stocks in emerging markets, to move money into AI stocks.
This trend is likely to lose steam and reverse in 2026, benefiting non-AI-dominated markets like India.
A more important factor for foreign capital inflows is the revival of earnings growth, which is likely to begin from Q3 FY26 onwards. This can bring the FIIs back to India sometime in 2026.
How do you expect the domestic macro situation to unfold in 2026?
From the domestic economic perspective, India is in a Goldilocks setting.
GDP growth, despite Trump tariffs, is robust and likely to touch 7.3% for FY26. Inflation is under control with the FY26 CPI print to come around 2%.
Our target for GDP growth and inflation for FY27 is above 7% and about 4%, respectively. More importantly, from the market perspective, we expect earnings growth of around 15% in FY27.
source: mint
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
No comments:
Post a Comment