Edited excerpts from a chat:
How are you studying the present fairness market assemble following the 1.5 year-long consolidation part? Is the time correction accomplished or do you see dangers of a deeper time correction given valuations and liquidity dynamics?
The Indian fairness market has navigated a 1.5-year consolidation since late 2024, with the Nifty 500 correcting 15% from its September 2024 peak to its March 2025 trough, addressing sluggish earnings and world uncertainties like anticipated tariffs from the US. The breadth of the market was fairly weak. Whereas the index fell 15% throughout this era, greater than one-third of the shares fell by over 25%. India’s financial deceleration is inconceivable to disregard. GST collections have grown in single digits year-on-year for eight consecutive months, whereas nominal GDP and Nifty 50 earnings have equally languished in single-digit territory—the latter for seven straight quarters. These aren’t fleeting knowledge blips; they symbolize a real cyclical slowdown that has rattled investor confidence.
Each the federal government and the RBI have responded with unprecedented vigour. Direct tax cuts and focused GST reductions are placing a reimbursement into client pockets, whereas fiscal self-discipline ensures macro stability.
Concurrently, the RBI has delivered record-low coverage charges and lowered the CRR (Money Reserve Ratio), flooding the system with liquidity whereas preserving inflation firmly in test. This coordinated fiscal-monetary push creates highly effective circumstances for restoration, with typical coverage lags suggesting the affect ought to materialise within the coming quarters.
Extra compelling is the valuation reset. Indian equities have underperformed rising markets and world indices by over 2,000 foundation factors prior to now 12-15 months—a staggering divergence that’s just about unprecedented. This correction has eradicated the valuation extra that constructed up in the course of the bull run, creating uneven risk-reward dynamics.
When coverage assist aligns with compressed valuations and excessive underperformance, imply reversion turns into extremely possible. India’s structural development drivers—beneficial demographics, ongoing urbanisation, and digital penetration—stay intact, in our view. The slowdown is actual, however probably non permanent.
We imagine the majority of worth and time correction is over. Markets might start to carry out higher as development picks up.
From a sectoral standpoint, which themes are demonstrating sturdy earnings momentum, and the place do you see the subsequent leg of management rising?
Whereas the broader market might digest the expansion slowdown, pockets of real earnings momentum are rising—and so they’re more likely to outline the subsequent part of market management.
Treasured and Non-Ferrous Metals stand out as structural beneficiaries of two highly effective tailwinds, in our view. The de-dollarisation development, accelerated by geopolitical fragmentation, is driving central banks globally to build up gold and diversify reserves – The Central Banks’ holdings of gold of their foreign exchange reserves have surpassed these of US Treasuries for the primary time in almost 30 years. Concurrently, the AI infrastructure growth requires monumental portions of silver (that is anticipated to be the sixth straight 12 months of deficit), copper (present and anticipated new capacities are unlikely to fulfill greater than 70% of demand over the subsequent 10 years), aluminium, and specialised metals for knowledge centres, semiconductors, and energy era methods. We imagine metals are benefiting from a multi-year capex and electrification cycle, relatively than a purely cyclical rebound.
Capital Market Performs—exchanges, brokers, wealth managers, and asset managers—symbolize one of many clearer secular development traits in India. Retail investor participation continues to deepen, with mutual fund SIPs hitting report ranges month after month, as Indian family financial savings shift from bodily belongings to monetary devices.
The earnings visibility for high quality franchises on this house stays beneficial, with working leverage intact and regulatory tailwinds supporting development.
PSU and Regional Non-public Banks supply compelling worth as a turnaround story reaches maturity. PSU financial institution web NPAs (Non-Performing Property) have improved dramatically, with important enchancment in asset high quality, narrowing the hole with non-public friends, a metamorphosis few anticipated a few years in the past. But valuations stay at important reductions, creating uncommon risk-reward dynamics. Regional non-public banks, in the meantime, are gaining share in underbanked markets with intact NIMs (Internet Curiosity Margins) and disciplined credit score development.
Do you suppose gold has topped out within the close to time period and that silver is greatest averted at this level?
Gold is a treasured steel that has lengthy served as a retailer of worth. In a extremely leveraged world, the place even authorities stability sheets are considerably levered, confidence in fiat currencies is taking a knock. During the last 25 years, whereas US GDP has change into 3x, its debt has grown over 6x – therefore, the incremental Debt/GDP within the final 25 years has been over 200%.
Within the final two centuries, every time a rustic’s Debt/GDP crossed 120%, it had a excessive chance of defaulting over the subsequent few years. The US is at 125% now.
In consequence, the central bankers of the world are slowly, however extra importantly, steadily, rising their publicity to gold. Now, their holdings of gold have surpassed these of US Treasuries for the primary time in almost 30 years – this speaks volumes.
India’s holdings of long-term US Treasuries have dropped to $174 billion (as of Dec 2025), down 26% from a 2023 peak, and now account for one-third of the nation’s international trade belongings. Gold in India’s foreign exchange reserves now stands at $107 billion. US Treasuries holdings to gold holdings ratio was 5.2x in Could 2023, now it’s 1.6x – a transparent diversification.
With regard to silver, it has a twin position – each as a financial asset and for industrial utilization. As a financial asset, its worth is pegged to gold. Silver’s distinctive property is that it’s the greatest conductor of electrical energy. The world’s demand for electrical energy is rising, pushed by AI, knowledge centres, renewable vitality, grid modernisation, EVs and so forth. Silver has been in deficit for the final 5 years and the demand is simply rising at a speedy tempo. Furthermore, the inventories are at report lows.
We’re bullish on each gold and silver.
What ought to traders take into consideration asset allocation at this juncture? Does the risk-reward favour incremental fairness publicity, or a extra diversified stance throughout asset lessons?
The query of asset allocation has by no means been extra important—or extra complicated. We’re working in a essentially distinctive regime in comparison with the one which prevailed over the previous decade.
We stay constructive on equities and treasured metals. Particular fairness sectors might supply sturdy earnings momentum, whereas treasured metals might profit structurally from de-dollarisation and AI-driven demand. The valuation reset in Indian equities, mixed with coverage assist, might create a lovely risk-reward for affected person capital.
Nonetheless—and that is essential—we’re navigating a world grappling with an rising new order, elevated debt burdens throughout developed economies, subdued development, and chronic geopolitical tensions. Volatility is more likely to stay structurally larger, with sharper drawdowns and extra frequent dislocations, and this actuality calls for a extra diversified stance. Treasured metals aren’t only a tactical play; they provide a level of resilience amid considerations round forex stability and geopolitical threat.
The chance in equities is actual, however so is the volatility forward.
It’s advisable to work with a certified funding advisor or monetary planner who can calibrate publicity to your particular circumstances—your time horizon, threat tolerance, liquidity wants, and tax state of affairs all matter considerably.
The ache in IT shares is not ending amid all of the damaging newsflow across the potential affect of AI. How severe is the risk for a long-term investor who comes with a 4-5 12 months horizon?
The Nifty IT Index trades at an eight-year low relative to the Nifty 500—a valuation low cost that is drawing consideration from contrarian traders. However earlier than dashing into what seems cheaper, long-term traders might must confront uncomfortable realities about this sector’s trajectory.
The weak point predates AI nervousness. During the last 3, 5, and 10 years, the IT sector’s earnings development has remained in single digits or barely scraped into double-digits. This is not a brief disruption, in our view; it is sustained underperformance reflecting real enterprise mannequin pressures—commoditisation of providers, pricing stress, and sluggish demand from key Western markets.
Now layer on AI disruption, which could be very actual. Generative AI is not simply one other expertise shift; it threatens to essentially alter how code is written, examined, and maintained. The labour arbitrage mannequin that powered Indian IT’s rise faces structural obsolescence as AI instruments allow shoppers to perform extra with fewer engineers.
This mixture—already anaemic development now going through extra headwinds—means that the earnings trajectory may deteriorate additional relatively than stabilise. Whereas they might supply excessive dividend yields, engaging free money circulate yields, and elevated payout ratios, these metrics are backward-looking. If development erodes additional, money era suffers, and people compelling yields might change into unsustainable.
The valuation low cost exists for a cause. Till Indian IT corporations exhibit concrete methods to reinvent themselves—pivoting to AI enablement relatively than displacement, shifting up the worth chain, or attaining real price transformation, the risk-reward might stay unfavourable even on a 4-5-year horizon, in our view.
How do you assess Q3 earnings traits thus far, and what would it’s essential see in This fall numbers to maintain market momentum?
The Q3FY26 earnings season delivered a story of two markets—one which’s encouraging beneath the floor, and one other that continues to be weak on the index stage.
Company India delivered its fourth consecutive quarter of double-digit earnings development, with spectacular participation: 19 of the 27 sectors within the Nifty 500 posted double-digit development. This breadth issues enormously—it alerts the earnings restoration is not confined to a handful of winners however is spreading throughout the economic system.
Metals led the cost, with earnings surging 33% year-on-year, benefiting from improved realisations and operational leverage. Oil & Gasoline, significantly OMCs (oil advertising corporations), noticed earnings bounce 2.4x as refining margins normalised and stock positive factors materialised.
Alternatively, the Nifty 50 delivered simply 7% PAT development—its seventh consecutive quarter of single-digit earnings enlargement. This disconnect between broad market energy and benchmark weak point displays composition results. The Nifty 50’s heavy weightings in IT, sure client segments, and choose monetary names which might be struggling have masked the enhancing momentum elsewhere.
For markets to maintain momentum in Q4FY26, two elements can be essential, in response to us. First, sectoral breadth should maintain—affirmation that 15-20 sectors can maintain double-digit development might assist the sturdiness of the restoration. Second, stability in Nifty 50 heavyweights can be constructive.
Are we lastly going to see smallcaps rallying as soon as once more in FY27?
The Nifty Smallcap 250 Index has been underperforming since September 2024. Whereas the principle indices like Nifty 50 & BSE 500 have traded largely flat, the Nifty Smallcap 250 Index is down 8%.
This correction has accomplished vital work in purging valuation extra. The excessive multiples that characterised pockets of the smallcap universe by way of mid-2024 have compressed. Nonetheless, excesses nonetheless persist in sure corners—significantly in momentum names the place narratives have outpaced fundamentals.
The trail to sustained smallcap participation in FY27 runs by way of macro restoration. As general earnings development accelerates, smallcaps sometimes exhibit larger beta to the cycle. Their working leverage, when development returns, might drive disproportionate earnings surprises that will rerate valuations shortly.
