After the recent sharp correction, the Nifty's valuation is near historical bottom levels seen over the past decade, said Shailendra Kumar of Narnolia Financial Services, adding that the declining Indian interest rates and potentially rebounding earnings suggest the Nifty may have found its floor.
From here on, according to him, the Nifty is likely to consolidate around current levels while global markets continue the high volatility phase.
On the de-dollarisation theme, he believes the US dollar's established role as the principal reserve currency, driven by its widespread adoption in international trade and finance, remains largely intact. Hence, the dollar's fundamental dominance does not look challenged for the foreseeable next 5-10 years, said the Chief Investment Officer at Narnolia Financial Services, who has more than two decades of experience in the fund management and investment advisory.
Do you believe the market has bottomed out, and that there is no bear market in the current financial year?
The Nifty's valuation has retreated from 2024 peaks, nearing historical bottom levels seen over the past decade. Coupled with declining Indian interest rates and potentially rebounding earnings, this suggests the Nifty may have found its floor. However, global market indicators, such as the US 10-year yield and elevated VIX, point to continued volatility for global markets over the remaining months of 2025.
Consequently, the Nifty is likely to consolidate around current levels while global markets continue the high volatility phase. Stock selection is crucial, as mid-cap and small-cap valuations remain above their long-term historical lows.
Do you still see healthy earnings growth in the current financial year, despite the risks from tariffs?
The dynamic and unpredictable nature of tariffs, underscored by recent US policy shifts, is creating a highly disruptive global environment. While some will gain, many will suffer. India's demonstrated policy flexibility and entrepreneurial responsiveness offer a significant advantage in converting these challenges into opportunities. Importantly, the limited reliance of major Indian stock indices on US export earnings mitigates the impact of global turbulence. We anticipate 10-12% earnings growth in FY26.
Are you bullish on CDMO and generic pharma companies, regardless of US tariffs?
We remain positive on the CDMO (contract development and manufacturing organization) sector, recognizing its critical function in new medical research and manufacturing. India's expertise in chemistry and related fields provides a strong foundation for these companies. The opportunity to combine Indian R&D with US manufacturing scale presents a compelling growth trajectory. Conversely, within the global generics space, careful stock selection is essential due to possible margin compression.
Do you believe the consumer sector is going to be a major outperformer?
The consumer landscape presents a complex picture, with distinct drivers influencing individual segments. We continue to hold a substantial overweight in consumer services, notably travel. While some consumer durables delivered strong returns, their current valuations are no longer supportive. Consumer staples face volume growth challenges, relying on price increases to maintain margins. We see opportunities only in select staples companies that are effectively leveraging digital commerce to gain market share.
Nevertheless, we do not foresee significant outperformance from the broader consumer sector in the near term. We'll likely see the consumer sector really take off again once India's per capita GDP hits that $5,000 mark.
Is it better to stay away from the IT sector, even though it offers great value right now?
The valuation of major IT services companies remains a concern, as they currently trade above historical levels observed during periods of comparable growth and margin headwinds. While these companies continue to generate substantial cash flow, global uncertainties delays project execution. We suggest waiting for valuation adjustments aligning with 2015-16 valuations. However, outside the IT services sector, select mid-sized IT product companies, demonstrating strong growth potential, present attractive investment opportunities in the market decline.
Do you see a pickup in the pace of de-dollarization worldwide, especially after Trump's behaviour?
The US dollar's established role as the principal reserve currency, driven by its widespread adoption in international trade and finance, remains largely intact. While diversification into alternative currencies is observed, particularly in bilateral transactions, the dollar's fundamental dominance does not look challenged for the foreseeable next 5-10 years.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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