According to Amar Ambani, executive director of Yes Securities, the Indian stock market should be revived in another three to six months as the six-month revision has already been corrected behind us. By then, we will be more clear about the trajectory of the “Trump Trade” and the Indian consumption narrative.
What is the outlook for Indian stocks?
With the exception of China, the recent suspension of US tariff rises is clearly positive for global supply chains. Unlike the demand shock seen during the 2008 and the Covid crisis, this is a supply-side problem, and the market welcomes temporary solutions. Over time, as global players diversify away from China, there is a hope of a series of trade readjustments in which India can manifest as net profits in regions such as electronics, specialized chemicals and manufacturing.
Indian stocks have enjoyed strong gatherings over the past four years, and at some point they have been inevitable to amend. But I consider this a pullback within a structural bull market, not the beginning of the bear phase. Headwinds exist, but the Indian banking system remains strong, businesses are being abolished, and developers are bolstering their balance sheets despite slowing down the real estate market.
With the six-month revision already behind us, the Indian stock market should regain its appearance in another 3-6 months. By then, we need to make the trajectory of the “Trump Trade” and the Indian consumption narrative more clear, potentially setting the stage for the next phase of the rally.
What do you think about the evaluation at this point?
The assessment has shown meaningful revisions over the past six months. Currently, trading multiples are below the median level of the 5, 10 and 20-year time frame. But we are not yet at a deep discounted level, especially when we stare at certain national and global headwinds. India continues to trade at a premium compared to most EMS. This has historically been supported by higher stock performance returns. However, it is currently almost one standard deviation over a wider EM index than the regular premium.
At this stage, the larger cap appears to be relatively better than the medium or small cap. Many middle and small caps are in unsold territory, but many still continue to trade at premium valuations. For stock pickers with keen eyes in quality, selecting the opportunities chosen in the mid and small segments can outweigh the larger cap.
What are your outlook for FPI flows in the future?
Global sentiment already shows signs of turnaround, with capital flowing to EMS above the historical average. US stocks are entering the corrective phase, driven by fears and concerns about recession over China’s technological advances. The narrowing evaluation gap between the developed market and EMS suggests a potential rebalance of global investment flows, along with improved revenue growth for EMS.
In India, the rupee’s sharp depreciation stage appears to be behind us, and as US bonds soften, FII sentiment could improve in the coming months. The FII has already increased exposure to India’s debt, reflecting the growing confidence in the country’s macroeconomic stability. Increased bank liquidity helps determine sentiment by helping to determine revenue visibility and consumption revitalization.
What do you think about India Inc’s revenue growth in the fourth quarter and the next few quarters?
Q4 FY25 NIFTY 50 companies’ revenues may remain flat on a year-on-year basis (excluding OMCS). The slightest positive friction comes from filming in the countryside and government spending on capital expenditures later in the fiscal year. The potential downside risk is further a revenue downgrade, which may not be fully priced yet.
For fiscal year 2013, nifty revenue growth is expected to be moderate at about 7% year-on-year, significantly lower than the 17% CAGR recorded in FY20-24. However, if this low base is in place, FY26’s revenue growth rate could rebound to 10-13%. Q1 FY26 could remain soft given the current economic cycle. Q2 From FY26 onwards, revenue momentum should improve, supported by low basic effects and government spending.
What sector do you think is advantageous now?
We are optimistic about the subject of electronics manufacturing, as a substantial portion of India’s current imports have been replaced by domestic production. With strong government support through incentives, the sector provides firms with clear long-term growth visibility.
The hospitality industry is also thriving, driven by rising occupancy rates and rising room rates. Furthermore, the increase in event and meeting bookings has become a significant revenue driver. Many hotel chains are further increasing returns by adopting asset light expansion strategies and ensuring sustainable growth with lower capital investments.
