Indian markets eye strong year as earnings rebound, FII selling ends; expect global Santa Claus rally: Mark Matthews

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At previous close, the Sensex was up 638.12 points (0.75 percent) at 85,567.48, and the Nifty was up 206.00 points (0.79 percent) at 26,172.4

Market strategist Mark Matthews expects a year-end ‘Santa Claus rally’ in global equities and sees India entering a stronger phase next year, driven by a rebound in earnings growth and an end to heavy foreign investor selling. Speaking to CNBC-TV18, Matthews - Managing Director at Bank Julius Baer & Co - said India’s underperformance this year was marked by single-digit earnings growth and sharp FII outflows, but now appears to be in the rear-view mirror, setting the stage for healthy gains.

Looking ahead, Matthews expects a meaningful recovery in India’s corporate earnings, forecasting Nifty earnings growth of 16–18 percent next year, supported by a low base and the lagged impact of interest rate and tax cuts. He said the heavy foreign institutional investor selling that weighed on Indian equities this year should now be largely over, arguing that those outflows were primarily driven by a temporary reallocation to China rather than a structural shift away from India.

On global markets, Matthews said he sees no reason why the traditional Santa Claus rally should not play out, noting that recent news flow has been constructive. He pointed to strong US economic data, including third-quarter GDP growth of 4.3 percent, and said the AI-technology bull market appears to be regaining momentum. Drawing a parallel with history, he said the current phase feels closer to 1997 or 1998 rather than the peak of the dot-com bubble in 2000, suggesting that markets may still have room to run.

Matthews believes India is well positioned to benefit as global investors look to diversify beyond US mega-cap technology stocks. He said foreign investors had exited Indian equities this year largely to finance renewed exposure to China after years of underweight positioning, with India being the only emerging market held in size. With that reallocation largely complete, he expects India to re-emerge as a preferred destination for incremental capital.

On the Indian information technology sector, Matthews said the underperformance over the past year stemmed from concerns that parts of the services model could be disrupted by artificial intelligence, as well as indirect fallout from trade frictions between India and the United States. However, he remains constructive on the sector, arguing that the scale of global investment in AI remains substantial and is unlikely to slow meaningfully. He said Indian IT companies are likely to adapt by finding new roles within the evolving technology ecosystem and added that the sector appears to have bottomed a few months ago.

On precious metals, Matthews struck a cautious note in the near term, saying gold prices now appear parabolic — a pattern that historically often precedes sharp corrections. While his instinct is to trim exposure at current levels, he remains structurally bullish over the long run. Matthews said the fundamental driver for higher gold prices lies in persistent fiscal indiscipline across developed economies, arguing that wide and unsustainable budget deficits are eroding confidence in fiat currencies. He highlighted the US debt-to-GDP ratio of around 120 percent — roughly double what the IMF considers prudent — as emblematic of the problem, adding that similar pressures are visible across Europe and Japan.