Still waiting for 20% returns? Raamdeo Agrawal’s equity forecast comes with this ceiling

Motilal Oswal chairman says market gains will likely track earnings growth as valuations limit scope for a fresh re-rating

• Investors should expect 12–15 percent annual equity returns.
• Valuation expansion is unlikely; focus shifts to earnings growth.
• Markets fairly priced; earnings drive returns.

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Investors should temper their return expectations from the stock market and align them with underlying earnings growth, Motilal Oswal Group Chairman Raamdeo Agrawal said, warning that the scope for a sharp valuation re-rating in equities appears limited.

Speaking in an interview with CNBC-TV18, Agrawal said a realistic expectation for equity investors in the current environment would be annual returns of about 12–15 percent, broadly in line with corporate earnings growth.

“I would go about having a moderate expectation of about 12 percent to 15 percent kind of return, because that is what the earnings alignment is,” he said.

Valuation expansion unlikely

Agrawal indicated that the market may not see a significant expansion in valuation multiples in the near term, suggesting that future gains will largely depend on companies delivering stronger earnings.

“I’m not too hopeful on the P getting re-rated again,” he said, referring to the price-to-earnings multiple that often drives market re-ratings during bull cycles.

In equity markets, returns typically come from two sources, earnings growth and valuation expansion. Agrawal’s comments suggest the second driver may remain muted for now.

Market now closer to fair value

According to Agrawal, recent volatility and corrections in the market have already moderated valuations to more reasonable levels.

He noted that the Nifty is currently trading at around 21.5 times current-year earnings, which places it in a “fairly priced” zone.

“It’s not grossly overpriced. It’s a fairly priced market,” he said.

However, he also cautioned that the market cannot be considered cheap at these levels.

“It’s not cheap. It’s a much more investable market, sensible, but it’s not a throwaway market,” he said.

Earnings remain the key driver

With valuations stabilising, Agrawal said the next phase of market returns will depend heavily on corporate earnings momentum.

He pointed to recent quarterly results as a sign that corporate performance remains healthy across sectors.

“If you see Q3, across the board what we covered, about 300 to 350 companies, the performance is very good,” he said.

He added that interactions with company managements suggest optimism about business conditions.

“If you go and visit the companies, I think you are finding more bullish companies than bearish companies,” he said.

Economic growth supporting earnings

Agrawal also pointed to broader economic indicators that support the earnings outlook.

India’s economy, he said, is showing signs of strengthening momentum, reflected in recent growth data.

“The real economy is on pick-up stage. You might have seen the Q3 numbers also, 7.8 percent of GDP growth rate. That is now visible in a more widespread way,” he said.

Moderate expectations, disciplined investing

While the long-term outlook for equities remains positive, Agrawal said investors should approach markets with realistic expectations rather than assuming outsized gains.

His comments come at a time when global uncertainties, including geopolitical tensions and energy market disruptions, have increased volatility across financial markets.

In such an environment, he said, investors would be better served by focusing on sustainable earnings growth rather than expecting another sharp expansion in market valuations.

“If you align your expectations with earnings growth, that is a sensible way to look at returns,” he said.