The NSE Nifty 50 is expected to trade within the 22,000–25,000 range over the next three months amid the ongoing trade war triggered by Trump tariffs, according to Manish Sonthalia, chief investment officer of Emkay Investment Managers Ltd.
Speaking to NDTV Profit on Wednesday, Sonthalia described the US-China tariff war as temporary "brinkmanship", adding that in the long run, the high-reciprocal-tariff would eventually settle down. "Coupled with possible US tax cuts, this could boost sentiment, much of which is already being preempted by global markets."
"I think the band (for the Nifty) will be 22,000 to 25,000 in the next three months. A lot of uncertainties around the tariffs will be over," Sonthalia said.
While global markets have rebounded, the Indian benchmark index is expected to remain range-bound even with a rally up to the 25,000 levels, according to Sonthalia. He also advised caution despite optimistic street forecasts and said the market would be fairly valued near 25,000 in the short term.
Nothing has changed as far as the numbers are concerned. Earnings trajectory on Nifty stays good at that 10–12% on the conservative side. Consensus Street estimates are still 14–15%. A lot of uncertainties are there, Sonthalia said.
"It's better to err on the side of caution. A 10–12% broadly at 25,000, you'd be fully valued for the near term. I would believe it that way," he said.
Manish Sonthalia (Image: Emkay website)
Commenting on market timing and cash-holding approach, the analyst said timing the stock market was a rare event, even for seasoned professionals.
"You will get it right one or two times out of 10 times. But the rest of the eight times when you go wrong. It will take care of the two times where you have been right. So, it's better that we don't try to fight the markets as far as the cash calls are concerned," he said.
He also advised against holding excessive cash, noting that keeping 5–7% is a reasonable bet. However, he cautioned the investors against blind optimism and noted that India's domestically driven economy was not fully immune to global trends.
On India's retail investor sentiment, Sonthalia acknowledged the encouraging signs of maturity. "It's no longer a herd mentality. There's pick and choose. While momentum can sway some at the margins, it self-corrects," he said.
Asked about prospects in the Indian market, he predicted that consumption would drive the next growth phase amid improving domestic conditions. Regarding the boost in consumption demand, he expressed optimism about mid-premium two-wheelers, travel, fast fashion, retail and insurance companies.
"With income tax cuts, falling interest rates, easing inflation and upcoming Pay Commission boosts, the domestic demand story looks strong. Rural incomes are improving and a normal monsoon is expected. The pendulum is clearly shifting from capex to consumption," Sonthalia explained.
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