Fragments:
Q. What is driving the Indian stock market right now? Is it the global signals, the profits, the liquidity or a combination of factors?
Sneha: Global signals are key, but India’s domestic factors, including the macro recovery and government reforms, are driving resilience. While global challenges limit the upside, fiscal and monetary measures are strengthening the economy and providing optimism for the year ahead. Second-quarter earnings are expected to be moderate, but investors are already taking the recovery into account.
Q. How sustainable are current market valuations?
Sneha: Large cap valuations are reasonable. Nifty is trading at around 20x FY26 earnings, in line with the 10-year average. Mid- and small-caps command a higher price, so selective investing is crucial. Compared to global markets, Indian equities have remained resilient, leaving room for upside.
Q. What are the early lessons from the second quarter results?
Sneha: The second quarter is expected to be soft, but slightly better than the first quarter, marking the start of the recovery towards FY27. Earnings cuts are slowing, and management commentary following the GST reforms will be critical. Early technical results from Persistent Systems, Tech Mahindra and HCL Tech have exceeded expectations, indicating gradual improvement.
Q. How important are FII flows compared to domestic fundamentals?
Sneha: FIs are still relevant, but domestic investors, both retail and institutional, have kept markets resilient despite global headwinds. Mutual fund inflows and SIP contributions have reduced dependence on FIIs. A gradual FII inflow is expected next year as the domestic recovery boosts confidence.Q. What global risks could impact Indian markets?
Sneha: The main short-term risk is trade tensions between India and the US. Industry-specific rates can impact markets. If trade talks conclude between November and December, markets could see an upward move; if postponed, the consolidation can continue.Q: Which sectors look strong for the second half of 2025?
Sneha: Sure, there are many sectors like –
- BFSI: Attractive valuations, improved credit flow and lower financing costs will support margins.
- Capital markets: Recovery in volumes following regulatory clarity could boost growth.
- Consumption: Rationalization of VAT, festive demand and healthy rural income support this space.
- Industry: The revival of investments after the monsoon can boost profitability.
Q. Which sectors should investors be cautious about?
Sneha:
- IT: Strong second quarter results, but headwinds remain; short-term caution is advised.
- Oil and gas: Volatility and geopolitical risks make it less attractive in the short term.
Q. What approach should long-term investors take in this market?
Sneha: It’s a buy-on-dip market. Government reforms and the coming earnings recovery make this favorable for long-term investors. Large-cap valuations are comfortable; selective stock selection in themes such as EMS, defense, healthcare (hospitals) and BFSI can add value. FY27 earnings could see 15-16% growth, which should support market momentum.
Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts/brokers do not represent the views of Economic Times.
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