Indian markets now look very attractive valuation-wise. It's getting more attractive in financial year 2026 and 2027, said Aniruddha Sarkar, chief investment officer and portfolio manager, Quest Investment Advisors.
The big concerns for India were valuation and earnings growth as the two were not in sync. India has been used to seeing 16–18% growth over the last four years. That's why the premium India enjoyed compared to the rest of the world is justified. But financial year 2025 was not great in terms of growth as earnings went down drastically, Sarkar said.
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In the first quarter, India Inc saw roughly 8% growth, but in the second quarter it was completely flat. Then there were concerns that if there wouldn't be double digit growth, there would be questions over premium, Sarkar said.
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In the last couple of months, there's extreme pessimism. At this point of time, there's absolute absence of buyers. Volumes are extremely low. There's a bit of panic, according to the CIO.
There's a huge difference in returns between the NSE Nifty 50 and NSE Next 50. A lot of debate is going on about how large-cap is doing better than small-caps etc. However, Nifty 50 and Nifty Next 50 are both large caps.
Interestingly, the Nifty Next 50 has fallen in line with the Nifty Midcap over the last couple of months, despite being a large-cap fund. Beyond Nifty 50, large-cap stocks are also declining, he said.
A look at the financial year 2026 and 2027 estimates shows that small-caps also look attractive. However, Sarkar isn't sure when will the recovery happen, even as valuation of companies have become attractive.
Most price damage happened in capex-related segment and consumption basket. This happened because the first half of FY25 was extremely bad for capex. No pick-up was seen till December 2024, he said.
But capex is expected to rise significantly in the ongoing quarter and next financial year hence, it is the one segment which is attractive, according to Sarkar.
Order books look strong, however, without execution it has no meaning. Execution pick-up is going to be a key trigger, he said.
Consumption has been weak in the last one year. Part of this is attributed to the income growth, which has been below inflation. And a part of it is attributed to the wealth erosion. With the tax incentive announced in the budget for financial year 2026, consumption will start to pick up from April this year, Sarkar said.
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