Broader Market Correction Gives Breathing Space To Long-Term Investors: Gautam Duggad

The correction in the broader markets provides "breathing space" to investors with a long-term horizon, said Gautam Duggad, head of research for institutional equities at Motilal Oswal Financial Services Ltd.

The markets are now "charitable" with the kind of corrections and moderation in valuations seen over the last three months, Duggad pointed out, while speaking to NDTV Profit on Friday.

While the benchmarks NSE Nifty 50 and BSE Sensex were down about 18-19% from their September peaks till earlier this month, the correction was sharper in the mid-cap and small-cap indices. The stocks in the mid- and small-cap space corrected up to 30-40%, he said.

"Till October-November (last year), it was buy first and think later. Now with prices down 30-40%, there is no rush to buy. Investors with a long-term horizon can think and do their homework without worrying that if they don't buy today, they'll have to buy at a higher rate around two weeks down the line," the market veteran said.

Despite the recovery seen in the markets this week, the stocks are still significantly lower from their September peaks, providing an opportunity for investors, he noted.

Duggad sounded optimistic on the prospects of the market for the next financial year. A likely uptick in corporate earnings, along with the Reserve Bank of India's liquidity push and monetary easing and the government's increased spending, will create a conducive atmosphere for the markets, he suggested.

On the wishlist, he said, is that three to six months down the line, one could say that 22,000 level was the bottom which Nifty hit during this round of correction.

According to Duggad, the earnings growth for Nifty companies is likely to close at an average of 3% in the ongoing fiscal year. However, in fiscal 2026, it is expected to be 14%, he added.

Among sectors, the Motilal Oswal analyst is bullish on financials. It is a "very interesting sector right now," he said, adding that some of the strong banks and asset management companies have "reasonable valuations".

The consumer discretionary sector, he said, has seen correction over the past three months, but some stocks are "still expensive".

Duggad also noted that quick-service restaurants and hotels have "not seen much earnings damage" over the last few quarters and have outperformed relatively.

Among IT companies, he believes that the prospects of high growth lie with niche firms. The large five IT companies, which provide stability to the sector, already comprise 90% of the profit pool and 92% of the market cap, he said. "But the real growth can come from niche IT companies."