Indian equity markets have moved past their most painful phase and are showing signs of bottoming out after a difficult two-year stretch, Sandeep Tandon, Founder and Chief Investment Officer of quant Mutual Fund, said at the NDTV Profit Ignite 2026 event on Wednesday.
Speaking on market dynamics and liquidity cycles, Tandon noted that macro fundamentals in India are strengthening, domestic liquidity is ticking higher, and foreign institutional investor (FII) selling is nearing exhaustion.
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"The last two years have been bad for the Indian market, but the market is looking much better now compared to two years ago," Tandon said. "We saw some capitulation in the market about six months ago. I believe the worst is behind us, and things will only improve from here."
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Nifty Forming a Bottom; Look at Relatives
Tandon highlighted that headline indices, including the benchmark Nifty, are establishing a durable floor. However, he urged market participants to adopt a relative evaluation framework rather than fixating on absolute valuations or index levels.
"You should look at relatives instead of absolutes," Tandon explained, pointing out that relative risk-reward ratios, sector rotations, and capital positioning provide a much clearer gauge of market bottoms than static multiples.
Addressing persistent industry criticism regarding domestic institutional flows, Tandon pushed back against the narrative surrounding local fund houses. "Everyone is blaming us mutual funds, saying that we are providing an exit to FIIs, private equity, and others," he remarked, underscoring that domestic institutional capital has provided much-needed systemic absorption and stability during sustained foreign outflows.
The Real Risk: Crowded Midcaps, Not Smallcaps
While broader market commentary often flags volatility in small and micro-cap names, Tandon offered a contrarian assessment of where structural froth currently resides.
"The worry is not smallcaps or nanocaps. The worry is midcaps," Tandon asserted. He pointed out that segment concentration has reached elevated levels in the mid-tier universe. "We have seen extreme euphoria in the Midcap 150 companies. The Midcap 150 area is very crowded currently."
Sector Rotations: Neglected FMCG, Bullish on Precious Metals
As capital rotates out of congested pockets, Tandon identified value in unloved and overlooked defensive segments.
According to Tandon, select fast-moving consumer goods (FMCG) counters have seen extended neglect despite healthy fundamental drivers, offering favorable risk-reward setups as broader market leadership broadens.
Beyond equities, quant Mutual Fund has leaned into hard assets to hedge against macroeconomic shifts and volatility. Tandon confirmed that the fund house has actively increased its allocation to bullion: "We have increased our exposure to gold and silver."
With macroeconomic indicators improving, selling pressure waning, and domestic liquidity turning supportive, Tandon reiterated that disciplined positioning in neglected sectors will outperform crowded momentum plays as the new market cycle takes shape.
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