Earnings biggest overhang on the market, don't chase recent outperformers: Jimeet Modi
Jimeet Modi
, Founder & CEO,
SAMCO Group
,
said valuations have run ahead of reality.
"One key mistake retail investors are making today is chasing recent outperformers in the mid- and small-cap space, driven by recency bias. This often leads to overexposure and heightened portfolio risk,' Modi said.
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Edited excerpts from a chat:
The market seems to be in a consolidation mode with downward bias. Is earnings the biggest headache for the market right now?
Yes, earnings are clearly the biggest overhang on the market right now. Valuations have run ahead of reality, and with global liquidity tight, investors are no longer rewarding potential — they want performance. The market's downward bias reflects this disappointment.
Live Events
Growth in a few sectors isn't enough to offset weak commentary in IT, realty, and global-facing names. The market is consolidating because it's waiting for clarity and earnings are the filter.
This is not panic, it's accountability. For investors, this is the time to separate hype from fundamentals. Stay focused on quality, execution, and margin trends. In markets like these, discipline is your edge, and patience, your biggest profit-maker.
What is your reading of the Q1 earnings season so far? Why do you think that the recovery that was expected in Q1 is gradually being pushed to Q2?
The earnings of Q1 FY26 were underwhelming versus expectations. Sectors like
BFSI
, auto, and capital goods have shown resilience, broader earnings lacked momentum. The recovery expected in Q1 is now deferred to Q2—not due to structural weakness, but timing mismatches.
External pressures played their part. Global demand remains soft, hitting export-oriented sectors like IT, pharma, and textiles. Geopolitical tensions and policy uncertainty dampened capital flows and sentiment.
Yet, margin stability across segments signals underlying resilience. As festive demand, inventory normalization, and capex revival take shape, Q2 could bring better visibility. For now, the market is seeking evidence before rewarding growth again.
Do you think that earnings are likely to see strong recovery from H2 onwards, given festive demand, impact of rate cuts, tax relief and low base effect?
Earnings are likely to see a meaningful recovery in H2, driven by multiple supportive factors. The festive season should boost consumer demand across discretionary and FMCG segments. Additionally, the anticipated rate cuts and recently announced tax relief measures are expected to improve consumption and corporate margins. A favorable base effect from last year's subdued performance is likely to further enhance year-on-year growth visibility. Overall, the macro tailwinds and improved sentiment create a strong setup for earnings momentum to accelerate in the second half of the fiscal year.
If you had Rs 10 lakh to invest in the market right now, how would you spread it across gold/silver, equities and debt?
Asset allocation drives long-term returns more effectively than stock picking. With ₹10 lakh to invest, a 60-25-15 strategy balances growth and stability. I'd allocate 60% to equities - split into 30% large caps for valuation comfort and defensive strength, 15% mid-caps and 15% small caps to capture high-growth potential. Large caps offer resilience amid inflation and rate cycles. 25% in debt mutual funds cushions volatility, given its low correlation with equities. The remaining 15% goes to precious metals—10% silver and 5% gold—based on silver's industrial demand and a favorable gold-silver ratio.
The IT sector has been the biggest loser in 2025 and many stocks are now facing their worst phase since the 2008 crisis. Do you think that more pain is in the offing or valuations have become cheaper now?
The Indian IT sector faced a tough first half of 2025, with the
Nifty
IT index down 24% YTD and its P/E at 25.5x, just above its ten-year average of 24x. Early Q1 earnings held up, but weak US tech budgets and new tariffs cloud the near-term outlook. Industry wide, we expect decent revenue growth in the future, yet stagnant share prices could drive P/Es lower. Still, India's IT firms benefit from lower operating costs and a large, skilled workforce. These structural advantages should support a gradual recovery in H2 2025, making current levels a selective entry point for long-term investors in top-quality IT names.
The recovery that we saw in small caps petered out in July, along with selling pressure in blue chips. At a broader segment level, do you think
smallcaps
are giving buy signals once again?
Q4 FY25 earnings came in below expectations, with broad-based profit pressures across the segment. This reinforces the need for caution, even as valuations have moderated post the July correction. The recent dip has reset market expectations, creating a more favourable entry point for sound companies. With India's structural growth drivers intact and domestic liquidity remaining robust, smallcaps could see improved traction in H2 FY26. While near-term volatility and external headwinds may persist, this phase offers a window to gradually accumulate quality businesses with resilient models and clear earnings visibility.
What's the one big mistake you think retail investors are making right now and one contrarian idea you'd back for the next 12 months? Diversification into non correlated assets is the best approach.
One key mistake retail investors are making today is chasing recent outperformers in the mid- and small-cap space, driven by recency bias. This often leads to overexposure and heightened portfolio risk. A contrarian idea I would back for the next 12 months is to diversify meaningfully across non-correlated assets such as debt, gold, silver, or even U.S. equities to manage volatility and preserve capital.
Multi-Asset Allocation Funds
offer a structured and efficient way to achieve this. They provide a disciplined approach to diversification and help retail investors build long-term risk-adjusted wealth.
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