Markets are in Ajit’s ‘Liquid Oxygen’ state: Kotak's Pratik Gupta

Pratik says the key catalyst is expected to be a sharp government capex push in H2, likely boosting investment and economic growth.

Equity markets are caught in a tight band—unable to rise meaningfully or fall sharply—much like Bollywood villain Ajit’s famous "liquid oxygen" trap, said Pratik Gupta, Co-head and CEO at Kotak Institutional Equities, in an interview with CNBC-TV18 this morning.

Agarwal recalled Ajit’s classic cult dialogue: “Mona Darling, isko liquid oxygen mein daal do. Liquid isko jeene nahin dega, oxygen isko marne nahin dega” (Put him in liquid oxygen. The liquid won’t let him live, the oxygen won’t let him die), to illustrate the market’s current dilemma. Tepid earnings growth and a steady supply of new equity paper are capping the upside, while strong domestic flows continue to cushion the downside, he said.

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While near-term sentiment remains cautious, there is still hope pinned on a recovery in earnings during the second half of the financial year, he added.

At present, market valuations remain elevated, with the Nifty trading at around 22 times forward earnings, levels that are considered expensive by historical standards. Earnings growth has been tepid across key sectors such as IT, consumer goods, and banking, all of which are expected to post single-digit growth for the full year.

Also read: Fund Manager Survey: Sentiment turns most bullish since 2024; India slips to fourth rank in Asia, according to BoFA

Despite the weak first-half performance on the cards, Pratik expects earnings momentum to pick up meaningfully in the second half, supported by festive demand, margin tailwinds from easing input costs, and an uptick in government-led capital expenditure. Overall, full-year earnings growth is still projected at around 11 percent.

A few key triggers could help support sentiment and improve the outlook, including a potential trade deal with the US, a reduction in retail-level petrol and diesel prices, and tweaks to the Goods and Services Tax (GST) regime. However, the most meaningful catalyst is expected to be a significant government capex push in the second half of the year, which could revive investment and support broader economic growth.