Short-term volatility continues, but long-term market outlook for India remains strong: Anshul Saigal

After a volatile week with the Nifty failing to close in green on a weekly basis, the near-term direction of the market remains uncertain. But according to Anshul Saigal, founder of Saigal Capital, too narrow a focus on weekly moves offers little value to investors. Instead, he believes the real insight lies in understanding where Indian markets might move over a longer horizon and the structural drivers underlying that journey.Asked about the outlook for the week ahead, Saigal was candid about the limitations of short-term forecasts. “I could flip a coin and say that the markets will go this way or the other next week, but it will be of very little value to your viewers if I were to give you a forecast on that. However, what would be of value to the listeners and also to commentators is what direction the markets are likely to go in over a longer term perspective, say one to three to five years, and what the ingredients of this move are.”

Based on that long-term vision, Saigal remains constructive towards India. He pointed out that markets are ultimately driven by growth and macro stability, and India appears well placed on both counts. Although the current fiscal year was relatively subdued in terms of profits, the prospects improve significantly thereafter. “Although FY26, the current year, has been somewhat of a weak year in terms of earnings growth where we see Nifty earning somewhere in the region of 8% growth, that is the expectation, but going forward, Nifty growth is estimated to be somewhere in the region of 15% to 16%.”This expected rise in earnings, combined with a stable macro environment, strengthens the case for Indian equities over the medium to long term. Saigal emphasized that inflation is under control and real GDP growth has remained robust over the past two quarters. Putting these factors together, he thinks the market may already have laid a foundation. “Take that all together and it looks like India, having established a base in the markets this year, is well positioned for a longer-term upside in the coming years, I mean, and that will be true for individual stocks as well.”

He also noted that there has already been a meaningful correction in many segments of the market. Several large-, mid- and small-cap stocks have undergone both price and timing corrections, creating a more favorable situation as growth accelerates. “And if you combine that with accelerating growth, that’s a nice setup and our view is that India looks very attractive for the long term.”

As for sectoral opportunities, Saigal says the answer depends on the investor’s goal. For institutional investors who aim to outperform the index, relative value matters. “If you’re an institutional investor who wants to beat the index because that’s their KRA, then clearly there are certain segments of the market where value has been created and on a relative basis those segments can do well.”

In that context, he says, IT is striking. “For example, IT has been consolidating over a long period of time and the earnings downgrades also appear to have peaked. So as of now, the risk-reward ratios look favorable and on a relative basis, IT could outperform.” However, for investors looking for absolute returns and outsized profits, Saigal sees opportunities in other parts of the market. Metals are one such area that has undergone a prolonged phase of consolidation. “Metal prices have not gone anywhere in the last two to three years and if the same trend were to continue in other metals, you could see upside there as well. Valuations there again remain quite reasonable.”

He also pointed to renewable energy, defense, capital goods and discretionary consumption as segments worth watching. According to him, discretionary consumption in particular has seen little movement since the pandemic. “If consumption will pick up due to various aspects, VAT rationalization, tax correction, your 8th Pay Commission revision and other aspects, then this is a segment that could see upside.”

As for smaller lenders and microfinance companies, Saigal acknowledged the pain the sector has endured in recent quarters. “Many of these microfinance companies have been under tremendous pressure over the last six to eight quarters. That’s the nature of this business, you’re going to see growth spurts and then pains on the asset quality side.”

He thinks much of that stress is now down to the industry, using a Hindi saying to illustrate the point. “There is a saying in Hindi: hathi nikal gaya puch reh gayi, something you may be witnessing in this space where most of the pain in terms of asset quality is behind us and maybe one or two quarters of the pain is ahead.”

Crucially, he says valuations already reflect much of the bad news. “In many cases this is already included in the price and that is why the disadvantages can remain limited from now on. If this problem decreases as we progress, the room for appreciation in the valuations could be quite large.” As a result, he believes that the risk-reward ratio at various microfinance and SME finance companies now looks attractive.

While short-term market movements may remain unpredictable, Saigal’s message was clear: For investors willing to look beyond short-term volatility, India’s growth trajectory, improving earnings outlook and selective valuation comfort continue to provide attractive opportunities.