Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company (AMC), believes that consumption remains the sparkling firecracker—a must-have for its multiplier effect in Samvat 2082.
Further, he noted that mid-cap IT also shows promise, driven by AI-led efficiency gains that outweigh concerns around H1B visa issues, which he believes are mitigated by various exemptions. According to Shah, the recent correction presents bottom-up buying opportunities, especially amid uncertainty in the US.
He emphasized that the Indian markets are likely to see more tailwinds than headwinds, underpinned by a strong domestic foundation. He added that USD weakness, policy chaos in the US, and overvaluation in US markets could potentially redirect foreign flows to emerging markets like India.
How would you summarise the journey from Diwali 2024 to Diwali 2025? What key learnings have emerged for you during this period?
The past Samvat was a tale of resilience amid strong headwinds. Nifty delivered modest 4-6 percent gains, lagging global peers, as FPIs and promoters sold relentlessly—citing high valuations, single-digit earnings growth over six quarters, India’s underperformance to peers, and unjust US tariffs hurting our exports, employment and growth.
Yet, DIIs and retail investors countered with steady buying via SIPs, buoyed by India’s intact long-term story. Government stimuli—Rs 1 lakh crore income tax cuts, Rs 1.96 lakh crore GST relief for the bottom pyramid on an annualized basis, EMI reductions saving another Rs 1 lakh crore as interest rate burden came down, and the 8th Pay Commission’s possible payouts in CY 2027—pumped money into pockets, fostering domestic momentum.
Markets traded sideways like a turtle, with no re-rating from 21x PE. Key learnings for me: Flows dictate near-term swings in a fear-vs-FOMO tug-of-war; fundamentals evolve slowly but prevail long-term; complacency on earnings is the real peril—stocks are slaves to earnings power, as Buffett says. I’ve learned to temper optimism with cash buffers for corrections.
As most experts believe the market has a strong domestic foundation, do you see more tailwinds than headwinds in the new Samvat?
Absolutely, more tailwinds than headwinds, anchored in a robust domestic foundation. Experts are right—India’s growth narrative endures, contributing alongside US and China. Tailwinds include stimuli igniting consumption: taxpayers, borrowers, and employees flush with cash will drive spending hopefully on swadesh goods and services, potentially exceeding earnings expectations in FY27.
USD weakness, US policy chaos, and overvalued US markets could redirect flows to EMs like India, the “cheapest” over five years per DIIs. Reforms unleashing entrepreneurship and a fair Indo-US tariff deal could rebound private capex.
Headwinds like FPI selling and IPO floods persist, but they’re momentum plays—DII/retail could create a FOMO (fear of missing out) amongst the sellers viz FPI/ Promoters and could flip them. Overall, domestic vigour should outweigh global jitters.
Are there any new major challenges you foresee for the market in the coming Samvat?
Yes, three loom large. First, earnings stagnation: If single-digit growth lingers into FY27 without tariff relief or capex revival, it erodes the valuation premium. Second, escalating US tariffs under a volatile administration could hurt GDP Growth and spooking FPIs further.
Third, promoter selling at peaks signals insider caution; high IPO supply could put pressure on markets. Complacency tops my worry list—we must sustain superior ROE and growth to justify valuations, or risk a derating.
The outgoing Samvat delivered modest gains of around 6%. Do you expect the market to perform better and deliver 10–15% or more in the new Samvat?
Can't predict short term returns. Valuation re rating isn't likely. Earnings growth will decide returns.
Moderate return expectations to high single digit to low double digit over medium term.
Which sectors do you believe could be the ‘firecrackers’ of the new Samvat and must-have in a portfolio?
Consumption remains the sparkling firecracker—must-have for its multiplier effect. Discretionary pockets will ignite travel/tourism (airlines over trains), home upgrades, health/education value-adds.
Government's Rs 4+ lakh crore annual pocket-fill (tax/GST/EMI/pay hikes) funnels here if spent locally, creating jobs and earnings.
Mid-cap IT sparks too—AI-driven efficiency trumps H1B noise (exemptions abound); correction offers bottom-up buys amid US uncertainty.
What advice would you give to new investors entering the market during this Diwali festival?
Enter with discipline, not festival frenzy. Focus on asset allocation across debt, equity, real estate and precious metal. Celebrate Diwali’s light but invest like it’s a marathon—steady wins.
Do you think Donald Trump could continue to pose a significant risk to global markets in the new Samvat?
Yes, significant—his tariff sabre-rattling already stung FY26 earnings and could escalate in Samvat 2082, hurting exports and spooking FPIs. Policy unpredictability amplifies USD volatility, but a “fair deal” might emerge if India leverages US supply-chain shifts. Still, it’s a tail risk; diversify beyond pure export plays.
Do you expect gold to continue its strong performance in the upcoming Samvat as well?
Likely yes, if central banks persist buying. Post-Russia’s $500 billion freeze, nations diversify reserves from fiat fears—gold/silver as “growth assets” shine sans yield. Monitor central bank purchases; as long as they buy there is upmove. If they sell there will be down move.
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