Current equity market outlook – Abhi to party shuru hui Hai - Diwali wali( Party has just started)😎
Samvat 2082: The Great Indian Market Rebound – From
Consolidation to Compounding
Diwali, the festival of lights, marks the traditional start
of a new financial year, or 'Samvat,' for the Indian business community. As we
usher in Samvat 2082 (Diwali 2025 to Diwali 2026), the mood on Dalal
Street is shifting from cautious consolidation to fresh optimism, following a
challenging year of mostly flat returns for the headline indices (Nifty 50 grew
by 4%).
Samvat 2081 saw the Nifty 50 and Sensex trapped in a
range-bound phase, despite pockets of sharp gains in specific segments like
Defence and PSU Banks. This period of "time correction" has
served a crucial purpose: cooling off valuations and setting the stage for an earnings-led
bull run. The consensus among market experts is clear: the next leg of
growth will be driven by corporate profitability, not just liquidity.
I. Indian Equity Market Outlook for Samvat 2082
A. Historical Context vs. Current Setup
Historically, periods following consolidation often precede
strong market uptrends. Samvat 2081 saw the Nifty deliver low returns (@ 6%) ,
but such pauses are essential for a sustainable rally.
- Valuation
Normalization: India's valuation premium over emerging market peers,
which was unsustainably high, has significantly moderated. The forward P/E
for the Nifty 50 has normalized below 20x, offering a more palatable entry
point compared to the highs seen the previous Samvats.
- Earnings
Bottoming Out: The corporate earnings downgrade cycle has largely
bottomed out. Analyst forecasts project a return to double-digit
earnings growth—around 12 % in the coming year, accelerating further
into FY27. This revival is the primary catalyst for the new Samvat. Earnings
growth is coming back with latest quarter(Q2 FY26) in double digits till
now
- Macro
Stability: India's macroeconomic backdrop remains robust, supported by
easing inflation, anticipated interest rate cuts globally and
domestically, policy continuity, strong domestic investor flows (SIPs) and
FIIs coming back . FIIs inflows have been positive for this month(October
unlike past 12 months when they removed >2 Lac crore-25 Bil $) as they clearly
had oversold Indian equities(Their Long to short ratio was at historic
lowest)
B. Nifty 50 Target for Diwali 2026
Based on the expected acceleration in earnings and valuation
comfort, brokerage reports are projecting significant upside for the Nifty 50.
|
Brokerage |
Nifty 50 Target (Diwali 2026) |
Implied Upside from current levels (approx.) |
|
Prabhudas Lilladher |
28,781 |
High Single to Low Double-Digit % |
|
ICICI Securities |
27,000 |
Mid Single to High Single-Digit % |
|
Choice Broking |
26,500 – 28,000 |
Mid Single to Low Double-Digit % |
|
Hedged.in |
Above 28,000 |
Low Double-Digit % |
Consensus Target: The broad market consensus for the
Nifty 50 target by Diwali 2026 is between 26,500 and 28,000. A break
above the 28,000 mark is possible if global liquidity improves significantly
and corporate earnings growth surpasses conservative expectations. From my
perspective , these Nifty target estimates are on the conservative level . I am
more bullish with EPS growth estimates of 14-15% ( given the measures/actions like GST rationalization, Income tax reduction
, liquidity related monetary actions by RBI , low inflation , good monsoon etc)
. With an fair valuation PE of 22 , this will about 30,000 , which is 16-17%
upside from current levels . If you do a good job on portfolio selection and
management , you can beat Nifty with 20% returns in this Samvat(1 year). High
quality & consistent growth Large caps businesse & selective mid caps
with consistent management track record , available at fair/ attractive valuation
should be preferred( small caps should be avoided now for valuation froth and market
uncertainty related reasons
II. Attractive Sectors: 1-Year & Long-Term (3-5
Years) Perspective
The investment focus must shift from chasing momentum to
identifying sectors with sustainable earnings visibility and policy tailwinds. With
current global slow down & tariff uncertainty, domestic focussed sectors should
be preferred . Apart from these sectors from equity related long term investment,
I would strongly advise to invest in Gold ETFs from asset allocation / diversification,
safe haven & better returns perspective. Gold is now a strategic
diversifying asset, apart from safe haven asset & has given equal or more
than equity’s returns in last 10-15 years (about 14-18% returns versus 12-14% Nifty
returns) and one should invest 10-20% of your portfolio into Gold ETF
A. 12-Month Outlook (Samvat 2082 - Focus: Cyclical
Recovery & Easing Credit)
|
Sector |
Rationale for 1-Year Returns & Upside |
|
Financials (Banks & NBFCs) |
Strong credit expansion, RBI liquidity & rate cuts , improved
asset quality (reduced NPAs), comfortable capital adequacy & GST reforms.
Private & select PSU Banks are well-positioned for strong profit growth.
NBFCs focused on MSME, Housing finance , and Gold financing should also
benefit. |
|
Automobiles & Auto Ancillaries |
Cyclical upturn led by rural recovery, festive season
demand, pent-up demand & GST rationalization.
Valuations have moderated, making market leaders in 2-wheelers and 4-wheelers
attractive. |
|
Capital Goods & Infrastructure/ Cement |
Sustained government focus on Capital Expenditure (Capex)
and infrastructure building. Companies in EPC, construction, capital goods
and related services have strong order books. Leading & profitable cement
companies also will do well cause of Infra push / capex . |
|
Power & Utilities |
Structural theme benefiting from policy push (green/
renewable energy target of 500 MW by 2030), transmission & distribution)
and improving plant utilization. Expected to generate significant alpha. Leading
Power Finance companies will also have a big benefit from this push. |
|
Travel & Hospitality |
This sector is looking
strong with discretionary consumption going up and Room occupation of leading
hotels going up significantly . GST reforms & festival fervour have added
to this , with mid-range rooms GST going down. |
|
Heath care |
Aging population,
domestic healthcare spend rising; Health Insurance penetration going up
significantly after Covid , This is making leading healthcare groups with
good brand and network doing well |
|
Defence & manufacturing |
With govt reforms & industry focus on manufacturing
& defence & with "Make in India" initiative & PLI
initiative(attracting investment of 2 lac crore in 14 sectors), companies
in manufacturing and defence are expected to perform well.
India defence production went up by 18% in FY25 due to Govt focus on
indigenization & export potential. (exports reached Rs 1.5 Lac crore ) |
B. Long-Term Outlook (3-5 Years - Focus: Structural
Growth & Policy Drive)
|
Sector/Theme |
Rationale for Long-Term Returns & Upside |
|
Manufacturing & Defence (PSUs) |
Policy-driven thrust for 'Make in India' and self-reliance
(Aatmanirbhar Bharat). Long-term order visibility in Defence, Aerospace,
Railways, and strategic manufacturing ensures compounding growth. |
|
Capital Market Plays |
Structural financialization of savings, with domestic
flows (SIPs) remaining robust. Demat accounts have been increasing rapidly .
AMCs, Depositories, and Wealth Management firms stand to gain from rising
investor participation. |
|
Consumer Discretionary/Staples |
India's long-term consumption story remains intact. A
gradual rural recovery and sustained urban consumption will boost market
leaders, especially those with moderating valuations and focus on high-margin
growth. |
|
Pharma & CDMOs |
Shift towards high-value activities like Contract
Development and Manufacturing Organizations (CDMOs), complex generics, and
biosimilars. Companies with strong R&D and global supply chain presence
offer structural growth. |
|
Telecom |
This sector is a long term consistent bet with 5G penetration
going up , ARPIs going up cause of price increases , data consumption going
up consistently , Digital transformation going up , 2G to 5 G migration etc |
III. Indian vs. Global Equity Market Outlook (12 Months
& 3-5 Years)
India is expected to maintain its relative outperformance
against global peers, particularly in the long term, due to distinct structural
factors.
|
Market |
12-Month Outlook |
3-5 Year Outlook |
|
India |
Cautious Optimism/Outperform. Set for an
earnings-led rally after consolidation. Domestic liquidity provides a strong
floor. Global rate cuts and FII return are key catalysts. |
Strong Outperformance. Driven by superior GDP
growth (projected 6.5%+), sustained corporate earnings growth, demographic
dividend, and policy continuity (Capex, Manufacturing push , Make in India). Expected
Earnings growth in 14-18% range |
|
United States (US) |
Neutral to Mildly Positive. Resilience in corporate
earnings (especially 'Magnificent 7' tech stocks) and a soft landing
scenario. Risks: High valuations outside big tech, skewed rally almost caused
by few IT / AI related firms fiscal debt
strain(Debt/ GDP =120%, leading to De-dollarization, and trade policy
uncertainty. Expected rate cuts are supportive. |
Moderated Growth/Neutral. Growth likely to slow
down relative to past decade. Valuations are high. Key theme: AI and
Electrification capex. The pace & consistent earnings growth will be a critical
determinant. Huge investments in AI should payoff |
|
Europe (Eurozone) |
Cautious/Neutral. Modest growth underpinned by
easing energy costs and potential monetary policy easing. Challenges: Export
dependency (trade war risks), low productivity, demographic/ ageing concerns and public
finance concerns in some member states. |
Moderate Growth/Neutral. Structural reforms are
needed. Dependent on global trade stability. Structural policy focus on
defence spending and green transition. |
|
China |
Cautious/Opportunistic. Extremely cheap valuations.
Positive: Stimulus measures and early signs of property market stabilization,
which could boost consumption. Risks: Geopolitical & tariff tensions,
structural slowdown, and a fragile property market(debt crisis). Inflation
remains subdued at around 1%(almost deflation) & Manufacturing
is showing a contraction for last 5 months(PMI below 50) indicating economy/
demand slowdown |
Neutral/Value Play. May remain cheap until
regulatory and geopolitical risks subside. Could be a tactical value play,
but long-term structural headwinds persist, leading to lower growth
expectations compared to India. Low inflation/ Deflation & property debt crisis
need to be solved |
Conclusion on Global Comparison & diversification/ asset allocation:
In the short term (12 months), global markets may
offer a liquidity-driven rally due to anticipated Fed rate cuts. However, India's
long-term story (3-5 years) is structurally superior. While US markets are
betting on innovation (AI), India is betting on fundamentals—demographics,
domestic consumption, and manufacturing scale. India remains the most
compelling long-term allocation among major economies. However , One can
, however one could have a 10-15% portfolio allocation on few resilient & consistently
growing global Index funds ( like Nasdaq, S&P 500, MSCI Emerging markets Index
funds ), from a risk diversification/ asset allocation perspective. Also , as mentioned earlier, invest 10-20% of
portfolio in Gold ETFs mandatorily as Gold has become a strategic &
productive diversifier in last 10-15 years , apart from being safe haven.
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