The Indian stock market has faced significant turbulence recently with major indices and broader markets reflecting a period of market weakness. However, experts like Sunil Singhania, founder of Abakkus Asset Manager LLP, believe the markets will stabilise.
Singhania expects the market to experience a "W-shaped recovery", implying that after the initial fall, a gradual stabilisation would occur, followed by another upward movement.
He does not think "we have reached a point of panic regarding valuations", but in terms of market sentiment and the intensity of the decline, we are getting closer. However, the market will eventually adjust on its own, Singhania added.
He advised investors not to get swayed by short term bounces and at the same time not to get scared of the markets and make a decision to sell.
Sanjay Parekh, founder and chief investment officer of Sohum Asset Managers, shared a similar outlook, highlighting that although the market was currently undergoing a rough patch, particularly due to external pressures such as US tariffs and global currency fluctuations, the situation would improve in the near future.
Parekh emphasised the importance of sticking to basic investment principles, where earnings growth and reasonable valuations would ultimately drive market recovery.
Both Singhania and Parekh agreed that a market bottom was close, with signs of capitulation and a possible slowdown in the intensity of decline. However, they urged caution and advocated a balanced approach, especially in the mid and small-cap segments, where selective investment based on fundamentals would provide the best opportunities for growth.
Parekh also warned about frothy valuations in some mid and small-cap stocks, which, despite recent falls, remained at high multiples. He stressed that not all small-cap stocks should be treated the same way and advocated a cautious approach, focusing on quality businesses with reasonable valuations and growth potential.
He further noted that while large-cap stocks had faced earnings downgrades and weak growth in the short term, the price risk in these stocks was largely absorbed, with a 15-18 month view, showing more stability.
On the broader market, Singhania added that foreign fund outflows and currency movements had intensified the market fall. However, he noted that the rupee's stabilisation was reassuring, and if global currencies stabilised, foreign funds might return to India.
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