Raghvendra Nath of Ladderup Asset Managers believes the market is more likely to trade in a wide range than rise to previous peaks until valuations cool further or earnings re-accelerate decisively.
He said earnings momentum is expected to pick up again in FY26, though the recovery will likely be uneven across the year.
"The first half should see modest mid single digit growth, followed by a stronger double-digit rebound in the second half, largely due to the low base effect from H2 FY25," said the Managing Director at Ladderup Asset Managers.
Do you see strong opportunities in hospitals, given that it is still an underpenetrated sector?
India's healthcare infrastructure faces a significant shortfall, with only 1.5 hospital beds per 1,000 people, which is half the WHO recommendation and far behind countries like Japan where there are 12+ beds per 1,000 individuals. With just 20 lakh beds currently available, the country needs more than double that to meet the global standards set by WHO. This gap presents a major opportunity for organized hospital chains, which are better positioned than standalone or smaller facilities in terms of capex deployment and inorganic expansions. These chains typically also receive higher payouts from TPAs for the same procedures, giving them a financial edge.
Additionally, factors like an ageing population and the rise in lifestyle related diseases are expected to further drive demand, making the case for scalable, organized healthcare models even stronger.
Do you expect a strong earnings recovery over the next year, following the slowdown in the last fiscal?
Earnings momentum is expected to pick up again in FY26, though the recovery will likely be uneven across the year. The first half should see modest mid single digit growth, followed by a stronger double-digit rebound in the second half, largely due to the low base effect from H2 FY25. After a strong post-COVID recovery, where Nifty50’s EPS grew at a 20 percent CAGR between FY20 and FY24, and a standout 24 percent growth in FY24 alone, EPS growth in FY25 was bound to see moderation.
Despite forecasts of mid single digit growth, actual EPS growth in FY25 came in at just around 1 percent. While H1 FY25 held up relatively well, H2 slowed down amid weakening rural demand, global trade pressures, and cautious corporate capex. With these headwinds easing and a favourable base effect, FY26 is poised to deliver a much better performance.
Is it better to maintain a high exposure to private banks and telecom?
India’s macro backdrop remains broadly supportive for both private banks and the telecom sector.
A slowing but still robust double-digit credit growth and a soft-landing rate cut cycle continue to provide tailwinds for the banking sector, although NIMs are expected to contract in the next few quarters. Maintaining high exposure remains strategically sound, though a more focused approach is now essential as PSU banks briefly outpaced private lenders in FY25. Several Fund Managers which we have recently interacted with are quite optimistic on the BFSI segment altogether. Against this backdrop, top tier private banks stand out, supported by strong operating leverage, clean balance sheets, and fairly low valuations.
Data penetration levels in India are only deepening, and telecom cash flows are poised to strengthen with the peak of 5G capex behind us. We foresee another tariff hike on the horizon, and this will boost revenue growth, just like we saw in Q2, Q3 and Q4 of FY25.
Is now the time to avoid consumer staples?
Rural demand is finally beginning to outpace urban, marking a positive shift. Although overall volume growth remains subdued at around 5 percent, still below the pre-COVID levels of 7–8 percent. Easing input costs may offer some margin relief, but stretched valuations leave limited scope for further re-rating. Meanwhile, value growth continues to outstrip volume growth, driven by a mix of premiumisation and the growing traction of small packs. Smaller SKUs alone accounted for nearly half of Q4’s value gains, highlighting evolving consumer preferences and pricing strategies.
Do you still see the possibility of two more rate cuts by the RBI in the remaining part of 2025, given that inflation is below the 4 percent target?
India’s policy repo rate of 5.50 percent is already 100 bps lower than at the start of 2025, and this is after an unexpected 50 bp cut on 6 June. The headline CPI is slowing and has slipped to a six-year low of 2.59 percent in May. In theory that gives the Reserve Bank of India the space to ease again, but Governor Sanjay Malhotra has also switched the stance to “neutral” and flagged “limited scope for further cuts.”
Market pricing and economist polls now point to one additional 25 bp cut as the base case. A second cut would need a perfect backdrop of soft food prices, tame crude oil prices. But the Israel-Iran conflict is already impacting crude prices, we hope this does not reverse the downward trend of inflation rate.
The RBI has front-loaded easing and is likely to pause for assessment. Favourable data might lead to one more 25 bp reduction, but a second cut is only possible given an unusually benign mix of low oil, good monsoon outcomes and continued global dovishness, which all simultaneously are in India’s favour.
What are the key headwinds for equity markets that could keep them away from record highs for an extended period?
Until valuations cool further or earnings re-accelerate decisively, market is more likely to trade in a wide range than rise to previous peaks. A defensive allocation strategy paired with cash reserves for opportunistic entries may prove more effective than chasing momentum in small and mid caps.
With market headwinds still in play, patience, disciplined position-sizing and a close eye on the macro factors will be crucial to navigate volatility and protect downside.
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