Daily Voice: Earnings improvement to drive market performance; US economy, global interest rates key in Samvat 2082, says Tata Asset's Rahul Singh

The outgoing Samvat was a period of adjustment for the markets. Valuations were quite elevated, especially in mid and small caps. Over the past year, we’ve seen that valuation gradually correct, with the Nifty 50 Price to Earnings coming down and the valuation gap between large and smaller companies also correcting. It’s been, in a way, a healthy reality check for investors.

Valuations today are still not cheap, but they’ve certainly normalised compared to the previous year. From here on, we expect the focus to shift more towards earnings growth. The government’s policy measures from income tax cuts and GST relief to a more growth-oriented interest rate stance are supportive of this trend.

We’re looking at a potential healthy Nifty 50 earnings growth in the coming year, compared with 4–8 percent seen in the last two years. That improvement in earnings, in our view, will be a key driver of market performance in the new Samvat. Overall, growth prospects look better than in the recent past.

Do you expect the new Samvat to be significantly better for equity markets in terms of returns, given that the outgoing Samvat delivered only 4–5 percent gains?

Yes. That’s the expectation.

Do you see more positives than negatives as we step into Samvat 2025?

It’s a bit difficult to look at it in terms of just positives or negatives. Most of the key positive triggers such as GST cuts, income tax relief, and the RBI’s easing policy have already come through over the past year. So, at this stage, I’m not really looking for fresh triggers, but watching for hard numbers, particularly topline and profit growth.

The policy measures we’ve seen so far are likely to translate into stronger earnings momentum in the coming year. That’s how we’re approaching it, less about new announcements and more about how the existing triggers play out in driving growth in the next Samvat.

Which sectors do you expect to lead in the new Samvat?

We expect growth to be led by sectors such as BFSI, consumer, cement, and to some extent, commodities.

For banks, healthy asset quality and improving margins should continue to drive performance. In the cement space, robust demand along with ongoing consolidation is likely to support stable pricing and profitability.

In the consumer sector, favourable monetary and fiscal measures, along with comfortable liquidity conditions, are expected to provide a boost to consumption.

Commodities, meanwhile, could be a contrarian play, but given signs of a revival in the Chinese economy, there’s potential for upward movement in commodity prices as well.

Do you believe the challenges seen during the outgoing Samvat will ease in the new one? And despite potential global uncertainties like the Trump factor, can the new Samvat be more energetic across fronts?

It’s hard to say definitively, because uncertainty has become a part of the landscape now. I don’t expect the coming Samvat to be significantly better or worse than the last one in that regard. However, what’s changing is the market’s ability to accept this uncertainty.

Last year, many developments caught investors by surprise. This time around, that element of surprise is likely to be lower, as markets are better prepared for volatility.

One broader shift we’re seeing is that the world is no longer moving in the same direction of globalisation as before. Each country, and by extension every investment decision, now needs to be viewed in that context, and I think that realisation has already started to set in.

What key factors should investors watch out for in the new Samvat — both globally and domestically?

Globally, the key factors to watch will be the trajectory of the US economy and global interest rates - whether growth there starts to come under pressure and how central banks respond. The behaviour of the US dollar will also be crucial, as it influences global liquidity and capital flows.

On the domestic front, the most important variables will be GDP growth and corporate earnings growth. Everything else, whether it’s the fiscal or current account deficit, or the health of corporate and banking balance sheets, it’s largely in good shape. The foundation is strong; what we now need to see is sustained corporate profit growth to build on it.

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