- India's equity markets may outperform due to earnings recovery and domestic liquidity
- High crude prices and geopolitical tensions pressure short-term market sentiment
- Medium-term drivers include tax cuts, GST rationalisation, and interest rate cuts
At a time of endured volatility and constant FII selling, India's equity markets could be poised for potential outperformance, which will be driven by a recovery in the earnings cycle and favourable domestic liquidity, according to Siddharth Vora, head of quant investment strategies at PL Asset Management.
Speaking to NDTV Profit, Vora offered his thoughts on the ongoing market movements, noting high crude prices, geopolitical tensions and the US Federal Reserve's interest rate outlook, all of which have pressured short-term sentiment. However, he believes India's medium-term structural drivers remain intact.
"I believe the presence of demand triggers from tax cuts, GST rationalisation, and interest rate cuts in India bodes well for creating good demand over a medium-to-long term," Vora said.
He added that the stable macroeconomic environment provides a "very positive bias" for the country compared to other emerging markets.
Vora went on to add that there is a significant shift happening in corporate earnings, which may finally move past a stagnant period. "The reasons for earnings to recover are already in place. I think the bottoming-out cycle—we've had six quarters of poor earnings—the worst is already behind us," he said.
As far as sectoral preferences are concerned, Vora highlighted a strong tilt towards 'value' as a dominant theme. He remains overweight in public sector undertaking (PSU) banks, citing their superior growth prospects and attractive valuations, compared to private sector counterparts.
"You get better value delta, better growth delta, and better quality delta versus private banks," Vora said. On the other hand, he remains cautious on the technology sector, noting his portfolio is "clearly underweight" on IT.
As domestic liquidity continues to stabilise the market against foreign outflows, Vora expects a significant rally if foreign capital returns. "When domestic liquidity couples with foreign liquidity, I think India can see a very good absolute and relative outperformance," he concluded.
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