'FIIs Remain Cautious ... Mid, Small-Caps Expensive': Is This A Warning Sign For Indian Market?
Nitin Bhasin, Head, Institutional Equities, Ambit told NDTV Profit that he believes mid- and small caps are more expensive than large-caps. which could be making investors cautious.
The Indian stock market continues to display volatility despite a mixed start to the April-June quarter earnings of FY26. According to D-Street experts, positive global cues, underpinned by optimism surrounding the US-Japan trade agreement, have helped support trader sentiment.
Progress toward finalising the India-UK FTA has further contributed to the constructive outlook. Advancements in global trade negotiations are expected to alleviate near-term trade tensions and foster greater stability. While elevated valuations remain a concern, analysts say the prevailing market strength indicates potential for near-term earnings recovery.
In the current scenario, Nitin Bhasin, Head, Institutional Equities, Ambit told NDTV Profit in an exclusive interview that he believes markets do not just move on valuations, but also on expectations. Bhasin added that the mid-and small-caps appear to be more expensive than large-caps, which could be making the broader investor sentiment cautious toward the market.
Nitin Bhasin warns that FIIs remain cautious on Indian markets
Bhasin told NDTV Profit that he did not pick any sense of exuberance or optimism while interacting with some of India's foreign institutional investors (FIIs) based in Indonesia, Japan, Singapore, and other Asian countries. He explained that FIIs are "appearing cautious" because of high valuations and a slowdown in earnings growth observed in the last few quarters.
"The benchmark Nifty 50 has been oscillating between 24,000-25,000 for months. Markets are trying to find a direction between mixed signals on the macro front. The economic growth is stable, however the earnings estimates for Nifty 50 in FY26 is below 10%, which has been the lowest ever in its history," Bhasin told NDTV Profit.
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Indian IT Sector's turnaround on the horizon?
Ambit highlighted in its recently released market strategy report that the Indian IT sector is on the cusp of a turnaround with a '"strong seasonality'' seen for returns. The IT sector has received the second highest weight in the quality factor and its NSE500 index weight stands at a 16-year low. Ambit believes the earnings growth for IT is ''stabilising," despite a cloud over the US macro indicators amid tariff risks.
However, for banks, Ambit remains reserved. It has highlighted that the earnings growth for banks is "slowing," dragged by lower credit growth and pressure on net interest margins (NIMS). Bhasin said he believes banks currently have high valuations, hence remain expensive for most investors.
