Indian equities could be nearing the end of their ongoing time-correction phase, with broader markets potentially delivering 15-20% upside over the next 12-15 months, according to Manav Chopra, Executive Director at Nuvama Institutional Equities.
In an interview with NDTV Profit, Chopra said the current market weakness reflects a correction within a bull market rather than a structural breakdown. He maintained a bullish stance on small- and mid-cap (SMID) stocks, arguing that Indian equities have absorbed significant geopolitical and macroeconomic shocks.
“Indian markets have digested a lot of negatives,” Chopra said, pointing to the resilience of small- and mid-cap stocks despite elevated crude oil prices and escalating global tensions.
According to Nuvama's report, a decisive breakout from the ongoing consolidation could trigger a structural expansion phase lasting 12-15 months, potentially creating opportunities for investors to deploy capital during the current correction.
Private Banks Emerge As Key Market Drivers
Chopra is particularly bullish on private sector banks, which he believes could provide leadership to the broader market after years of underperformance.
He noted that the relative-strength ratio of private banks has broken out after nearly five years, signalling a potential revival in the sector's market leadership.
The banking sector's performance will be crucial for benchmark indices, given its significant weightage. A sustained recovery in private banks could support the Bank Nifty and improve the prospects for the Nifty 50.
Chopra also drew parallels between the current market formation and the consolidation phases witnessed in 2010 and 2012, when markets absorbed selling pressure before transitioning into a stronger uptrend.
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SMIDs, Autos And Healthcare Remain Preferred Bets
Nuvama remains bullish on SMIDs, with a preference for mid-cap private banks, non-banking financial companies (NBFCs), microfinance, healthcare, auto ancillaries, infrastructure and capital goods.
Tyres, chemicals and metals are among the turnaround opportunities identified in the report.
Chopra also highlighted autos, healthcare and pharmaceuticals as sectors where the broader uptrend remains intact. Within financial services, capital market stocks could be approaching the latter stages of their correction.
He added that the market continues to offer bottom-up opportunities, with individual stocks potentially delivering significant returns even if benchmark indices remain range-bound.
Dollar Index Offers Some Comfort
On the macroeconomic front, Chopra said the dollar index holding around the 101-102 levels has offered some comfort, suggesting that global developments have not triggered extreme panic or a major shift in asset allocation.
He also noted that the rupee's movement within a broad range of 95-97 against the dollar, following repeated RBI interventions, could provide some relief to domestic equities.
While large-cap stocks remain in a repair phase, Nuvama believes small-caps continue to maintain a higher-high, higher-low structure, supporting its constructive medium-term outlook.
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