Neelesh Surana, Mirae Asset’s CIO, has said that the second half of 2025 appears constructive for the market, supported by monetary easing, fiscal measures, and improving rural sentiment.
“Record highs are possible,” he said, adding that valuations remain reasonable, though not deeply attractive.
Surana said the market is increasingly focused on the prospects of a cyclical recovery this fiscal. “We estimate ~12% earnings CAGR over the next two years, with key contributions from BFSI, metals, telecom, and a rebound in consumer demand,” said the Chief Investment Officer at Mirae Asset Investment Managers (India).
Edited excepts:
Do you think developments in the Middle East and tariffs are no longer major threats to the equity markets and other asset classes?
Geopolitical and tariff-related risks remain relevant globally, but their direct impact on Indian equities appears relatively limited—unless there’s a sharp and sustained oil price shock. Encouragingly, global oil supply conditions remain stable, and India’s current account deficit (~1.3% of GDP) offers a buffer. As long as oil prices remain within a reasonable range—our base case scenario—the broader spillover into Indian markets and other asset classes should remain manageable.
Read More: How the Iran-Israel war has altered the market
Do you now believe that markets are looking ahead to earnings and supportive financial conditions?
Yes, the market appears to be looking beyond the expected softness in FY25 earnings and is increasingly focused on a cyclical recovery from FY26 onward. We estimate ~12% earnings CAGR over two years, with key contributions from BFSI, metals, telecom, and a rebound in consumer demand. This recovery is likely to be supported by falling rates, improved rural income, and fiscal tailwinds such as tax relief and the 8th Pay Commission.
RBI’s Rs 9.8 lakh crore liquidity infusion since January 2025 has pushed surplus liquidity above Rs 5 lakh crore, setting the stage for smoother monetary transmission. Overall the normalisation in earnings, along with robust MF flows and stable policy direction, forms a conducive environment for equity markets.
Watch: MC Mutual Fund Summit 2025: Fund Managers Urge Caution on Valuations, Back Growth Over Sectors
Will the second half of 2025 be significantly better for equity markets than the first half? Do you see the market reaching record highs during this period?
H2 2025 does appear more constructive, backed by monetary easing, fiscal support, and improving rural sentiment. A rebound in mass consumption is likely, especially in discretionary categories. However, we expect the market trajectory to be more stock-specific, driven by actual earnings delivery rather than indiscriminate rallies.
While record highs are possible, near-term market prediction should always be avoided. Valuations remain reasonable but not deeply attractive, and many companies continue to face pressures from rising competition and disruption. In this context, a 5-year CAGR in the low teens remains a realistic benchmark.
Do you see any risks to inflation, which is expected to remain subdued in the coming months?
Inflation in FY26 is likely to be in line with the RBI’s 3.7% forecast, but CPI may trend higher in FY27, likely between 4% and 4.5%. Core inflation remains contained, but food and fuel continue to be key variables. That said, India’s well-established inflation-targeting framework and solid macro fundamentals inspire confidence.
Notably, the India–US 10-year yield spread is at a two-decade low, signalling India’s macro strength and favourable capital cost dynamics. Overall, inflation risks appear contained, allowing for continued policy support.
Read More: Moneycontrol Mutual Fund Summit: Will small cap party continue or pause?
Most experts believe that defence companies are currently overvalued. Do you find it difficult to justify the high valuation multiples of these companies?
Yes, many defence and industrial stocks appear to be pricing in optimistic growth, and valuations are hard to justify. While domestic defence manufacturing is a long-term structural theme, stock recent price moves in several stocks have outpaced earnings visibility.
We’ve accordingly pared back positions in this space. Our investment philosophy remains grounded in owning quality businesses, but at reasonable valuations—something that is currently difficult to find in most defence names.
Are you making big bets on AI-related plays?
We are constructive on AI as a long-term enabler of business transformation, but actionable investment opportunities in the Indian listed space remain limited. AI’s value lies in enhancing operational efficiency, data analytics, and automation across sectors.
We prefer companies that integrate AI meaningfully within their core business models, with measurable productivity gains. Rather than treating AI as a standalone theme, we apply the same disciplined, bottom-up approach to evaluating its impact within the broader investment thesis.
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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
