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News18
3 days ago
- Business
- News18
Indian Equity Market Nears Lifetime Highs: Fundamentals Or FOMO? Market Expert Bhole Weighs In
Last Updated: Indian equity market nears lifetime highs due to strong macro indicators, foreign inflows, and political stability. Atul Bhole of Kotak Mahindra AMC discusses market fundamentals. The Indian equity market has rebounded after a prolonged sluggish period and is now approaching lifetime highs. Factors such as strong macroeconomic indicators, consistent foreign inflows, and political stability are providing positive momentum. As a result, market sentiment remains optimistic despite high valuations and subdued earnings growth. Markets are dancing near lifetime highs. How much of this is driven by fundamentals and how much by FOMO? Bhole: India's macro fundamentals are currently in a sweet spot and among the strongest globally. Tightly controlled fiscal and current account deficits, lower inflation, a stable currency, and steady GDP growth of around 6–6.5% are attracting foreign flows in a big way. While these fundamentals have been strong for some time, their resilience became even more evident during the ongoing global trade war. From the start of the year until mid-April 2025, FIIs sold close to $15 billion worth of Indian equities. However, since mid-April, the trend has reversed, with FIIs buying around $5.5 billion—largely from the secondary market rather than through IPOs, QIPs, or direct stake sales. Domestic flows have also remained reasonable, with mutual funds raising cash levels and retail participation staying measured compared to the recent past. While corporate earnings growth remains muted and valuations are stretched, strong macro fundamentals are clearly driving robust foreign and domestic flows into Indian equity markets. Bhole: Several SMID stocks witnessed value erosion of 40–60% between June–July 2024 and March–April 2025. These stocks were driven more by momentum, false narratives, illiquidity, and FOMO than by sound fundamentals or reasonable valuations. Institutional investors, such as mutual funds, which rely on research and expert insights, were able to avoid such pitfalls and limit drawdowns. Some retail investors likely learnt valuable lessons during this episode and may now start appreciating the value that mutual funds and advisors add to long-term wealth creation. However, the market often behaves like a voting machine in the short term—it keeps attracting new investors or leads the same investors to repeat new mistakes. The recent sharp rally in defence stocks after the skirmish is another example of greed or FOMO overriding rational investing behaviour. Operation Sindoor has also worked like an international defence expo showcasing the might of Indian defence companies. This is also reflected in the dramatic movement in share prices. How strong is the defence story on Dalal Street? Bhole: India's defence equipment industry has gained strong momentum over the past 3–5 years, supported by a government-led indigenisation push and larger, expedited orders. The ecosystem is developing well, with private sector players emerging as credible component manufacturers. Defence stocks performed extremely well post-Covid until mid-2024, driven largely by policy support and effective execution. However, much of the returns were driven by valuation re-rating rather than actual earnings growth. Price-to-earnings multiples jumped from 10–20x to 50–60x. Between mid-2024 and March 2025, many of these stocks saw 40–60% drawdowns from their over-stretched levels. Post Operation Sindoor, defence stocks bounced back significantly and are once again trading at valuations that may not be justified by near-term fundamentals. While these companies could deliver sustained long-term growth, the market seems to have priced in too much, too soon. A period of cooling-off or extended consolidation in stock prices is likely. With valuations stretched in certain pockets of the market, do you think the Q4 earnings season was strong enough to justify the rally? Bhole: The Q4 earnings season has been muted yet again, with 5–10% earnings growth depending on the sector and company size (large caps vs. SMIDs). However, the market hasn't reacted negatively, as expectations were already lowered after three consecutive quarters of weak growth and cautious corporate commentary. Markets are forward-looking. While Q4 results aren't particularly strong, future earnings could improve due to tax breaks, a normal monsoon, stronger wage growth, continued capex, and a low base effect. The ongoing rally is being driven more by strong macro fundamentals and capital flows. A pause may occur until corporate earnings begin to align with expectations. As an investor today, would you back consumption, capex, or financials in FY26? Bhole: Post-Covid, all major themes and sectors have had their moments in the sun and are now trading at fair to high valuations. The triggers that powered past sectoral rallies have largely played out. As the market normalises, future returns will likely be driven by individual stock selection rather than broad sector bets. At a sub-sector level, we are constructive on areas like quick commerce, hospitals, power transmission & distribution, EMS, and large private banks and NBFCs. On a contrarian note, the IT sector—supported by stronger-than-expected US corporate health and good dividend yields—could also present interesting opportunities. Given current earnings momentum, macro tailwinds, and political stability bets, is Nifty 30,000 a realistic target by end of FY26? Bhole: At the macro level, India is in a strong position. However, this must begin to reflect in corporate profitability as well. After the recent rally, Indian markets are once again trading at 21–22x forward PE, which requires significantly higher earnings growth than the current pace. Earnings may pick up with rising disposable incomes, continued capex, and structural reforms. However, global trade dynamics and economic trends pose external risks. Major economies like China and Europe could begin attracting more capital depending on tariff negotiations and monetary/fiscal policy shifts, given their relative valuation advantage. The US fiscal situation and dollar strength will also influence capital flows and asset prices globally. Investors have been caught between two battlefronts lately—the global trade tariff war and near war-like tensions between India and Pakistan. Now that both seem to be easing, what are the key takeaways for investors from this double dose of geopolitical anxiety? Bhole: In the long run, stock prices are ultimately anchored to earnings growth. In the short run, markets often overreact to news and sentiment. Over the past five years, we've witnessed events that typically unfold over a decade—or even a century. From the Covid pandemic and wars to supply chain shocks, dramatic progress in computing and AI, and aggressive fiscal moves by the US—markets have endured and evolved through all of it. The key takeaway for investors is to adapt to new realities while staying grounded in timeless investing principles. Studying market history helps investors manage their behaviour better. Patience, systematic investing, and the ability to exploit fear and greed cycles are essential to achieving long-term investing goals. top videos View all Disclaimer: The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions. About the Author Varun Yadav Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian More Stay updated with all the latest news on the Stock Market, including market trends, Sensex and Nifty updates, top gainers and losers, and expert analysis. Get real-time insights, financial reports, and investment strategies—only on News18. tags : India Stock Market Nifty stock market Location : New Delhi, India, India First Published: June 01, 2025, 15:00 IST News business » markets Indian Equity Market Nears Lifetime Highs: Fundamentals Or FOMO? Market Expert Bhole Weighs In
Economic Times
27-05-2025
- Automotive
- Economic Times
Sensex soars 10,000 points from April lows. But India Inc's Q4 numbers expose cracks in market rally
Live Events Still, risk looms large. (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel The Sensex has stormed back with a stunning 10,000-point plus surge since April lows, but Nifty 's Q4 earnings growth is clocking in at under 6% year-on-year, a number that's raising eyebrows among analysts. Even as the market brushes off the disappointment, the current valuations, already hovering at 21-22x forward price-to-earnings, demand a far more compelling earnings story."Q4 earning season is turning out to be muted yet again in absolute terms, with 5-10% earnings growth depending on sectors," Atul Bhole, EVP & Fund Manager, Kotak Mahindra Asset Management, told ET market, ever the forward-looking beast, appears to be banking on a robust FY26, driven by a low FY25 base and macro tailwinds like tax breaks, improving wage growth, capex uptick, and a favorable monsoon. But Bhole warned, "India appears to be in a better situation as of now, but larger economic blocks like China & Europe can start attracting large amounts of capital depending on tariff negotiations & changing fiscal / monetary policies given relative valuations advantage. US fiscal position & dollar valuation would also impact flows & hence asset prices.'March quarter numbers, however, didn't leave the Street overtly disappointed as expectations were already lowered post 3 quarters of continuous low-growth and weak corporate commentaries.'It was a kind of mixed bag across sectors,' said Sunny Agrawal of SBI Securities. He pointed to strong showings by ICICI Bank, HDFC Bank and Kotak, with Axis Bank missing expectations. Cement and metal sectors showed sequential improvement, driven by easing input costs and better realizations. Autos were a mixed lot, with M&M and TVS Motors performing well, while Hero MotoCorp consumer staples, volume growth was tepid, though Marico stood out with 6% volume growth. Jewelry and value retail players reported solid SSG growth, and QSRs held up despite a seasonal and smallcaps emerged as outperformers. "We are finding that the growth momentum may continue for the next two years, especially from midcap and smallcap companies," Agrawal added, noting that markets are rewarding bottom-line strength over sentiment.'Our FY26E/27E net profits of the Nifty-50 Index have seen cuts since the start of CY25,' said Shrikant Chouhan, Head of Equity Research at Kotak Securities. With Nifty trading at ~22x/19x for FY26E/FY27E, he warns that continued EPS downgrades could threaten target levels. "If that continues then there is a risk to our [Nifty 26,000] target."According to Elara Securities, Nifty50's rebound from March lows has been more price-driven than earnings-led, with PE multiples rising from 21x to 23x. Only a few top contributors like ICICI Bank and HDFC Life saw both earnings growth and rerating, while Reliance Industries and Adani Ports surged on sentiment more than in Nifty MidCap 150, the 17% rebound was mostly earnings-led, especially in names like BSE, HPCL, Polycab, and MRF, where price moves outpaced PE rerating, a positive sign of fundamentals driving midcap Lilladher noted a similar trend. With 80% of Nifty 50 earnings declared, Q4 has shown sales growth of 4.8%, EBIDTA up 7.4%, and PBT growth at 14%, with margins expanding YoY and QoQ. 'We don't expect a significant change in trend,' they Mittal of LIC Mutual Fund remains cautiously optimistic. "Q4 season has been better than expectations... the downgrade cycle appears to be behind us," he said. With falling bond yields and ample liquidity, 'downside is capped, and upside will depend on the earnings trajectory.'Q4 earnings, therefore, haven't fallen off a cliff, but they also haven't provided the rocket fuel needed to justify valuations near all-time highs. With the global macro environment turning fragile and earnings growth still playing catch-up, the market's next move hinges on whether corporate India can deliver — and deliver fast.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Time of India
27-05-2025
- Business
- Time of India
Sensex soars 10,000 points from April lows. But India Inc's Q4 numbers expose cracks in market rally
Despite the Sensex's impressive 10,000-point surge, Q4 earnings growth for Nifty companies is a modest under 6%, raising concerns about market valuations. While the market anticipates a strong FY26, analysts caution about global economic uncertainties and potential EPS downgrades. Midcaps and smallcaps outperformed, but overall, earnings need to catch up to justify current market highs. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Still, risk looms large. Tired of too many ads? Remove Ads The Sensex has stormed back with a stunning 10,000-point plus surge since April lows, but Nifty 's Q4 earnings growth is clocking in at under 6% year-on-year, a number that's raising eyebrows among analysts. Even as the market brushes off the disappointment, the current valuations, already hovering at 21-22x forward price-to-earnings, demand a far more compelling earnings story."Q4 earning season is turning out to be muted yet again in absolute terms, with 5-10% earnings growth depending on sectors," Atul Bhole, EVP & Fund Manager, Kotak Mahindra Asset Management, told ET market, ever the forward-looking beast, appears to be banking on a robust FY26, driven by a low FY25 base and macro tailwinds like tax breaks, improving wage growth, capex uptick, and a favorable monsoon. But Bhole warned, "India appears to be in a better situation as of now, but larger economic blocks like China & Europe can start attracting large amounts of capital depending on tariff negotiations & changing fiscal / monetary policies given relative valuations advantage. US fiscal position & dollar valuation would also impact flows & hence asset prices.'March quarter numbers, however, didn't leave the Street overtly disappointed as expectations were already lowered post 3 quarters of continuous low-growth and weak corporate commentaries.'It was a kind of mixed bag across sectors,' said Sunny Agrawal of SBI Securities. He pointed to strong showings by ICICI Bank, HDFC Bank and Kotak, with Axis Bank missing expectations. Cement and metal sectors showed sequential improvement, driven by easing input costs and better realizations. Autos were a mixed lot, with M&M and TVS Motors performing well, while Hero MotoCorp consumer staples, volume growth was tepid, though Marico stood out with 6% volume growth. Jewelry and value retail players reported solid SSG growth, and QSRs held up despite a seasonal and smallcaps emerged as outperformers. "We are finding that the growth momentum may continue for the next two years, especially from midcap and smallcap companies," Agrawal added, noting that markets are rewarding bottom-line strength over sentiment.'Our FY26E/27E net profits of the Nifty-50 Index have seen cuts since the start of CY25,' said Shrikant Chouhan, Head of Equity Research at Kotak Securities. With Nifty trading at ~22x/19x for FY26E/FY27E, he warns that continued EPS downgrades could threaten target levels. "If that continues then there is a risk to our [Nifty 26,000] target."According to Elara Securities, Nifty50's rebound from March lows has been more price-driven than earnings-led, with PE multiples rising from 21x to 23x. Only a few top contributors like ICICI Bank and HDFC Life saw both earnings growth and rerating, while Reliance Industries and Adani Ports surged on sentiment more than in Nifty MidCap 150, the 17% rebound was mostly earnings-led, especially in names like BSE, HPCL, Polycab, and MRF, where price moves outpaced PE rerating, a positive sign of fundamentals driving midcap Lilladher noted a similar trend. With 80% of Nifty 50 earnings declared, Q4 has shown sales growth of 4.8%, EBIDTA up 7.4%, and PBT growth at 14%, with margins expanding YoY and QoQ. 'We don't expect a significant change in trend,' they Mittal of LIC Mutual Fund remains cautiously optimistic. "Q4 season has been better than expectations... the downgrade cycle appears to be behind us," he said. With falling bond yields and ample liquidity, 'downside is capped, and upside will depend on the earnings trajectory.'Q4 earnings, therefore, haven't fallen off a cliff, but they also haven't provided the rocket fuel needed to justify valuations near all-time highs. With the global macro environment turning fragile and earnings growth still playing catch-up, the market's next move hinges on whether corporate India can deliver — and deliver fast.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
