Markets May See Rally In Near-Term But Earnings Growth Crucial For Momentum: Ambit Investment Managers MD

Indian markets may see a rally in near term as some positive developments are expected. India will likely strike a trade deal with the US soon, and the Reserve Bank of India will reduce interest rates further, which will give momentum to Indian markets, said Dhiraj Agarwal, managing director, Ambit Investment Managers.

However, earnings growth will be crucial for markets to keep their upward momentum rather than any external factors, according to Agarwal. India Inc.'s earnings growth has been declining for last four quarters, which is a bigger concern.

There is hope that earnings growth will rebound into the next financial year. But it is just hope. For financial year 2025, Nifty earning growth was at 5–6%, and the NSE Nifty 50 is trading at 21 times price-to-earning multiples, which is not justified, he said.

"I'm a little skeptical about earnings rebound in the second half. Not as of now, but have been since the mid-nineties," said Agarwal.  

Channel checks of Ambit Investment Managers are suggesting that there is no pickup in demand as of now. It will be a stock-picking market with no clear sector trend. Every sector will have its winners and losers. 

All the happenings in the US and in the global landscape are bound to cause some economic slowdown. Nobody is saying that economic growth will pick up in the near-term with all the events unfolding, which creates a tough environment, Agarwal said.

Discretionary budget will be cut first. Hence, IT will be like any other sector where an investors really need to be picky. With the current valuation and growth outlook, the sector is not expected to do well, he said.