Fear versus Fomo to determine the market direction, Probably profit in FY27: Nilesh Shah

Indian stock markets are at a intersection, balance between the fear of foreign investors and the confidence of domestic investors, according to Nilesh Shah, director of Kotak AMC. In an exclusive conversation with ET Nu, Shah emphasized that the current cautious vote comes from non-reinforcing FPI sales, profit growth with one figure and global rate uncertainties, but domestic investors continue to bet on the growth pocket of India.

Struggle between fear and fomo

Shah explained that markets are being caught in tug of war.

“If FPIs succeed in creating fear in the heads of Diis, markets can see more disadvantage. But as domestic investors create FOMO for FPIs, we may see a bottom and upside down in shares,” he said.
He emphasized that profit information remains the ultimate engine of market stability.

Profit recovery more likely in FY27

On profit views, Shah noted that although H2 FY26 can see some improvement from GST speed reductions and the liquidity support of RBI, the real momentum will be built in FY27.

“We have a reduction in income tax, GST reduction, cutbacks and the 8th wage committee that come into play. Collectively these measures can significantly stimulate domestic demand,” he added.

GST is not a magic wand, consumer expenditure key

Although GST rationalization is expected to meet consumption, Shah warned that the actual impact depends on how consumers issue their extra disposable income.

“If people spend on Swadeshi goods, the economy benefits. But if it flows into foreign travel or imports, the benefit will decrease,” he said.

Portfolio -Strategy: Focus on discretionary consumption and select Defense

Shah advised on sectoral bets:

• Consumer discretionary shares: Because households are likely to spend on travel, hospitality and house improvement instead of staples.
• Defense: Selective, with a focus on companies that focus on futuristic warfare and global markets.
• Capex Coupled Sectors: Companies with strong order books and operational leverage.

The battery phase despite rate sound

Shah revealed that Kotak AMC gradually collects the shares, driven by their ability to use Enterprise AI.

“IT service companies create cheaper, faster, better solutions. Enterprise AI can be as great as the current IT services. With the depreciation of the rupees and dividend yields, it looks attractive for long-term investors,” he said.

He added that the American policy support will be crucial in shaping IT sector perspectives.

Long -term story intact

Despite the short-term turbulence, Shah insisted on investors to stay focused on the 10-year growth potential of India.

“India may look expensive, but on a five -year basis it is the cheapest emerging market because of superior profit growth,” he said, with reference to the profit growth of India in the past decade versus only 10% for China.