After months of weak sentiment, heavy foreign selling and currency volatility, the India–US trade breakthrough has triggered a sharp shift in market mood. Is this just a relief rally, or the start of a more durable uptrend?
In a conversation with Moneycontrol, Madhusudan Kela, market veteran and founder of MK Ventures, explains why he believes markets have formed a bottom, how currency stability could revive foreign flows, and why investors should now prepare for a “buy-on-dips” phase, even beyond today’s euphoria.
Q: Is this euphoric move justified?
I would not call it euphoria. The market has been in distress mode on account of multiple factors right from growth slowdown, valuation concern, geo-political uncertainty and the market itself not moving which created a negative sentiment spiral. This great news on the deal has come at a point where the mood was really negative, and that’s why you see this kind of an upmove today. Markets will settle down, but the important thing is market have now formed a base.
This is certainly an inflection point from both an India perspective and a market perspective.
It addresses many hidden concerns that were troubling investors — questions around India–US relations, whether foreign institutions would exit aggressively, and whether geopolitical risks would worsen. A lot of that uncertainty is now getting resolved.
Q: How important is the currency move in this shift?
Currency is the biggest factor.
You are already seeing the rupee move closer to 90. For foreign investors, currency stability is critical. Once they see stability, money starts flowing back.
For the last 18 months, foreigners have sold into every rally. Many global funds are underweight India. There is also tremendous short selling in the market. Incremental buying will now start coming in.
Even domestic investors are light on positions. The market had become “sell on rise.” I believe we are now clearly moving into a buy-on-declines market.
Q: So you do feel more confident to deploy capital now…
Yes. Now one can actually plan and invest.
One important structural change from the Budget is around buybacks. Earlier, companies faced tax friction while doing buybacks. Now the company itself does not pay tax — only shareholders do when they tender shares.
This creates a strong incentive for companies with surplus cash to prefer buybacks over dividends. Over the next one to two years, I expect buybacks to increase meaningfully, which is positive for valuations and capital discipline.
Q: Where do you expect to see sustained traction?
Many small and mid-sized companies saw almost no investor interest over the past 18 months.
Now we are seeing business ownership changes — reports suggest dozens of businesses have already changed hands, with many more expected. When strategic buyers step in, they are willing to pay fair value because they see growth potential.
That helps unlock value in companies that were previously ignored by markets.
Q: Which segments could lead the rally?
Export-facing companies will naturally be early beneficiaries because tariffs were a major overhang.
But this rally is not just about exporters. Large-cap names — including energy, infrastructure and conglomerates — can also benefit as risk perception eases and foreign flows return.
Both foreign money and domestic sidelined capital are likely to participate.
Q: What is the main risk investors should watch out for?
Supply of paper.
There is likely to be a significant increase in equity issuance — whether through stake sales, block deals or capital raising. Investors need to be mindful of what they buy and why they buy it.
Q: Where do you see value right now?
It’s a bottom-up market.
Large companies will do well, but personally, I am focusing more on mid-sized companies. Many of them have corrected significantly over the last two years and now offer attractive value.
Size does not matter to me — business quality and long-term potential do.
Q: History of market cycle tells us that after significant market peaks, market slip into a consolidation mode after bottoming out. Do you see a decisive reversal now?
You are absolutely right, if you study market cycles, every strong multi-year rally is followed by a consolidation phase. But corrections typically last around 13 to 19 months. After that, markets stabilise and begin climbing again before entering a frenzy phase several years later. The real buying opportunity is at the end of the correction — not at market peaks. So, what it means is, it’s time to start building portfolios.
Q: But you are you convinced the bottom is in?
Yes, I am very clear about this.
Markets will always have risks — geopolitical events can happen anytime. But from here on, I believe markets will remain buy-on-declines.
Even if prices fall, I will not be afraid to step in and buy quality businesses.
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