Expert view: Nifty may deliver single-digit returns in CY25; positive on pharma, private banks, says SAMCO MF CIO

Mint

5 hours ago

Expert view on markets: Umeshkumar Mehta, CIO of SAMCO Mutual Fund, expects no significant positive surprises on the earnings front, which may keep market momentum in check. Talking to Mint, Mehta shared his views on the Indian stock market, key challenges and the sector he is positive about. Here are the edited excerpts of the interview:
We expect benchmark indices to deliver single-digit growth for the year.
The modest performance of the Nifty 50 in the first half was largely driven by a slowdown in corporate earnings.
Looking ahead to the second half, we do not foresee any significant positive surprises on the earnings front, which may keep market momentum in check.
Adding to the subdued outlook is the overhang of geopolitical uncertainty, particularly the Iran-Israel conflict.
The duration of this conflict remains unpredictable, but its prolonged continuation could have broader implications.
Iran, being one of the world's largest producers and suppliers of oil and gas, plays a critical role in the global energy ecosystem.
Any sustained disruption in this region could lead to volatility in crude oil prices, with potential ripple effects across the global economy.
Currently, the Indian stock market is navigating several obstacles: Geopolitical instability, particularly the escalating tensions in the Middle East involving Iran and Israel, continues to weigh on investor sentiment.
Additionally, the deadline for the three-month extension of the tariffs is approaching fast, adding to global trade-related uncertainty, which could have ripple effects.
Domestically, there are segments within the small and mid-cap segments where valuations are a matter of concern.
Despite headwinds, India stands out for its macroeconomic resilience.
This is characterised by resilient domestic demand, stable inflation and a policy environment.
Investors with a long-term horizon should use corrections as an opportunity to accumulate rather than waiting for complete clarity, which may never fully arrive.
The pharmaceutical sector continues to present compelling opportunities for investors, supported by a mix of strong domestic fundamentals and favourable global dynamics.
In the current geopolitical climate, the China+1 strategy has gained further momentum as global companies look to diversify their supply chains away from China.
This shift places India in a strategic position, given its established leadership in generic drug manufacturing, robust R&D capabilities, and cost-effective production processes.
With a reputation for producing high-quality medicines at globally competitive prices, India's pharma industry is well-positioned to play an even more critical role in global healthcare.
Domestically, rising healthcare awareness, increased government spending, and growing demand for affordable medicines are additional tailwinds that strengthen the sector's long-term growth prospects.
Private sector banks have witnessed a rally in recent weeks, yet they continue to offer valuation comfort relative to other segments of the market.
Their strong fundamentals, healthy balance sheets, and improving credit growth outlook position them well for sustained performance.
The recent RBI rate cut further enhances their prospects by reducing funding costs and potentially boosting loan demand, making the sector an attractive option for investors seeking both stability and growth.
On the consumption front, while overall demand has been somewhat subdued, early signs of recovery are visible, particularly in rural areas.
The tax cuts announced in the February Union Budget are gradually starting to benefit middle-class households and small businesses, translating into higher disposable income.
As spending picks up, sectors such as FMCG, travel, apparel, and restaurants are likely to see increased traction, offering strong long-term potential for investors riding India's consumption wave.
In India, after implementing a front-loaded 100 basis point cut in the repo rate, the Reserve Bank of India (RBI) is expected to hold off on further action for now, allowing time to gauge the effects of the easing.
Additional rate cuts could be on the table if economic growth weakens further or if disinflation gains momentum, with any potential moves most likely to be considered in the December or February policy meetings.
The interest rate trajectory in the US this year is likely to remain cautious and data-dependent, which reflects the Federal Reserve's wait-and-watch stance given the economic uncertainty due to tariffs.
Inflationary pressures continue to persist due to tariff-related risks and geopolitical developments.
The Fed appears hesitant to pursue aggressive monetary easing. While some policy easing later in the year cannot be ruled out, particularly if growth softens, the overall stance suggests that any such moves would be limited.
However, the outlook could shift if economic data around consumer sentiment and GDP growth weaken.
A sharper-than-expected economic downturn could compel the Fed to reconsider its position and adopt a more accommodative approach.
For Indian equities, the trajectory of US interest rates remains a key external factor. The Fed's stable or accommodative policy stance tends to favour emerging markets by improving liquidity conditions and boosting investor confidence.
This could be beneficial for Indian equity. However, continued global uncertainty, particularly from US trade policies and inflation dynamics, could further increase volatility in the markets.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.