Global and Indian Equity Market Outlook: A Tale of Two Timelines

 

 Global and Indian Equity Market Outlook: A Tale of Two Timelines

The global equity landscape presents a complex yet fascinating picture, balancing moderating inflation and interest rate cycles in developed markets against the robust, domestically-driven growth of emerging economies, especially India. Understanding the interplay between macroeconomic fundamentals and market dynamics is key to navigating the next 12 months (short-term) and the 1-3 year horizon (medium-term).

 

Big Picture: Growth Is Slower Globally, but India Still Stands Out

The latest IMF World Economic Outlook (Oct 2025) projects:

• Global GDP growth around 3.2% in 2025 and 3.1% in 2026, with advanced economies at ~1.5% and EMs just above 4%. 
• US growth revised up to about 2.0% in 2025 and 2.1% in 2026, helped by an AI-investment boom offsetting tariff headwinds. 
• Euro area expected to grow about 1.3% in 2025 and 1.2% in 2026, according to the European Commission.
• China projected at 4.8% GDP growth in 2025; still solid, but a far cry from its double-digit years. 
• India remains the standout: IMF, Moody’s and Deloitte all cluster around 6.5–6.9% annual growth over the next couple of years, making it one of the fastest-growing major economies globally. India grew at much higher 7.8% as per latest quarter results(Q1 FY26-April -June)

 

---

🌎 Global Economy & Equity Outlook

The dominant narrative globally is the shift from high inflation and restrictive monetary policy toward a "soft landing" scenario.

Short-Term (Next 12 Months: 2026)

• Moderating Global Growth: Global growth and inflation are expected to moderate, though uncertainty remains elevated due to geopolitical risks and ongoing trade policy shifts.
• The US Focus: The US economy is expected to see slower but still positive growth, supported by resilient consumer balance sheets and robust AI-driven capital expenditure (CapEx). The Federal Reserve (Fed) is anticipated to pause cutting interest rates, likely front-loaded in the first half of the year.
• Projected Returns (US): Most short-term forecasts are bullish, anticipating positive returns in the range of 6-8% for 2026, driven primarily by earnings growth and the rate-cut cycle. The biggest risk is big time investments into AI (>500 Bil in 2025 itself) and projected optimistic Returns on AI related investments by big IT companies which is driving the current US equity rally . Is it a bubble or the returns/ profits will back this super optimism?  That time will only say as this is the single biggest risk.  The "Magnificent Seven" (Google, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have driven a majority of the S&P 500's gains in recent years. This creates a scenario where if these stocks perform well, the index looks healthy, even if the other 493 companies are struggling
• Europe and China: Europe's outlook is supported by shareholder distributions and fiscal spending plans. China is expected to meet its growth target of around 4-5% for 2026, relying on continued policy support.
• Projected Returns (Europe): Similar to the US, a positive, but moderate return in the range of 5-7% is often projected, supported by easing inflation & monetary easing(European Central  bank cutting rates)
• Projected Returns (China): Volatility and policy uncertainty are high. Returns could be range-bound in the short term, possibly 3-5%, with significant dispersion.

Medium-Term (1-3 Years: 2027-2028)

• Structural Shifts: The medium-term outlook is shaped by structural forces like Artificial Intelligence (AI) investment &  ROI on these AI investments( single biggest risk), geopolitical fragmentation, and shifting global supply chains.
• Developed Markets (US & Europe): Growth is expected to converge towards potential, with AI-related investments likely driving CapEx. Ten-year forecasts from major institutions suggest annualized total returns for:
• Projected Returns (US): Around 6-7% annually (primarily driven by EPS growth). Major risk is around ROI in heavy AI related investments by Big tech(Magnificent Seven companies)
• Projected Returns (Europe): Around 7% annually (balanced between earnings and shareholder yield).
• Emerging Markets: Emerging Markets, including India, are positioned for stronger returns due to higher expected Earnings Per Share (EPS) growth.
• Projected Returns (Emerging Markets ex-Japan): Forecasts point to total annualized returns of over 10% for the next decade, with India being a key driver.

---

 India: The Outperformance Story

India's equity market is increasingly being viewed through a structural lens, where strong domestic fundamentals are expected to decouple its performance from global headwinds over the long term.

I have always been bullish on Indian economic prospects and hence market returns( which has down a strong co-relation with GDP growth in India in long term). In my blogs in early2025(March/ April) when Nifty was at 22000(due to intense volatility), I has projected steady medium term rise to 28000 by FY26 end and today Nifty 50 is at 26000(despite short term volatility due to Trump’s tariff mania , Geopolitical reasons , massive FII outflows. In last month blog (Abhi to party shuru hui Hai), I talked about this medium & long term optimism about Indian markets cause of structural India growth and demand story , strong macros , favourable govt & RBI policy & demographic dividends.

📈 Economic Backdrop: GDP & Consumption

India remains the fastest-growing major economy, with recent GDP data proving resilient.

• GDP Growth: Q2 FY26 real GDP growth was estimated to be strong, around 7.5% YoY, driven mainly by robust services growth and private consumption. Commerce and Industry Minister Piyush Goyal has expressed confidence that India's growth could touch 7% for the fiscal year, comfortably above global projections. My estimates are that we will easily grow at 8% in FY26 and FY27. We have become the 4^th biggest GDP after beating Japan this year & will soon become the 3^rd biggest after beating Germany(which is in almost recession) In 2027.
• GDP-Equity Correlation: A unique feature of the Indian market is the strong, reliable correlation between real GDP growth& market  equity returns (in USD terms) over decades. This suggests that the economic expansion is effectively translating into corporate profits and stock market performance.
• Consumption & Capex Revival: Policy measures like GST rationalization and income tax relief are poised to boost domestic consumption significantly. Private Capital Expenditure (CapEx) is projected to become a stronger contributor to growth from 2027 onwards.

Short-Term Outlook (Next 12 Months)

• Near-term Volatility: The market may remain somewhat range-bound in the immediate short-term due to slightly higher valuations on an absolute basis(Nifty 50 at 22.7 versus 22.3 of  last 5 years average) and lingering global uncertainties (e.g., US tariffs/trade policy, wars ).
• Earnings Pick-up: An improvement in macro indicators and a strengthening earnings trajectory could set the stage for a stronger rally from the second half of 2026 onward. MSCI India consensus EPS growth estimates for the 2025/26 calendar year are around 13%. Consensus EPS growth for India in 2026 is broadly in the mid-teens (~14–16%)
• Projected Returns (India): Given the robust but consolidating phase, short-term returns are projected to be positive but potentially moderate, likely in the 10-12% range.

-        Goldman’s Nifty target of 29,000 by end-2026 implies ~12% upside from recent levels. 

-        HSBC’s Sensex target of 94,000 by end-2026 implies ~10–11% upside. 

-        Morgan Stanley’s call is at 95000 by 2006 end (12% upside  from current levels)  

-        My estimates are much more optimistic (based on strong macros , structural growth story and earnings growth picking up & FIIs returning back in Oct/ Nov after over-selling in last few quarters) at 15-20% growth with Nifty 50 at 31000 to 32000 levels (from 26000 level now)

 

Medium-Term Outlook (1-3 Years)

• Structural Bull Run: The medium term is highly constructive. Supported by an expanding domestic market, strong macro fundamentals, continued structural reforms (like 'Make in India' , GST and Income Tax rationalization, LI incentives ), and rising investor inflows from Domestic Institutional Investors (DIIs), India is set for a structural bull market. MSCI India consensus EPS growth estimates for the 2026/27 calendar year are higher, at around $16\%$.
• Projected Returns (India): Over the 1-3 year horizon, India is expected to deliver premium returns. Annualized returns are projected to be in the 12-18% range, making it a key outperformer among major global markets. My estimates are more bullish at 15-18% growth

---

🎯 Attractive Sectors in India (Projected Returns Perspective)

The best-performing sectors will be those that align with India's domestic growth drivers: Consumption, Infrastructure, and Policy-driven manufacturing.

Sector	Rationale for Growth (Medium-Term)	Key Drivers
Consumer Discretionary/Automobiles	Direct beneficiary of rising disposable income, GST rationalization (lowering prices), and pent-up demand.	Festive seasons, tax relief, credit policy easing for auto loans.
Infrastructure & Capital Goods	Supported by the government's sustained focus on CapEx and the eventual revival of private CapEx (from 2027).	Government's National Infrastructure Pipeline, urban development, manufacturing supply chain shifts. PLI incentives
Banking and Financial Services (BFSI)	Expected to remain strong due to steady credit growth, improved liquidity transmission, and the overall financial health of the economy.	Steady credit growth, low inflation supporting margins, formalization of the economy. Monetary easing by RBI
Renewable Energy	Driven by aggressive national targets (e.g., 500 GW of renewable energy capacity by 2030) and supportive government policies.	Solar, wind, Green Hydrogen  and bioenergy capacity expansion; falling technology costs.
Healthcare & Pharmaceuticals	Increasing healthcare demand from an aging population, rising disposable income, and government initiatives like Ayushman Bharat.	Higher health insurance penetration, focus on domestic manufacturing (APIs).
Defence & Electronics Manufacturing	Policy-driven growth from the focus on Self-Reliance (Aatmanirbhar Bharat). Defence production is targeted to triple by 2029. Electronics(including Smart phones) have become one of the largest exports driver recently	Import substitution, technology-led manufacturing schemes (PLI).

---

Final Takeaway

The next 12 months for global equities will be a transitional phase, defined by the pace of rate cuts, Geopolitical issues , US-India trade deal closure , returns on big AI investments & the outcome of the US 'soft landing.' However, the medium-term outlook is distinctly skewed in favor of India. Its robust & resilient GDP-led earnings growth, powerful domestic consumption engine, and aggressive structural reforms position it as a key market for outperformance.

Happy investing

Amardeep

Read More

Is this the start of the end of Dollar & US hegemony ?? Implications for investors

 

Title : Is this the start of the end of Dollar & US hegemony ?? Implications for investors 

Hello friends

 

  This innocent looking table(Published in Economic Times this week) startled my mind & forced me to dig deeper . After digging deeper & doing some research through credible sources & AI tools , my earlier belief became stronger that “ This is the beginning of end of Dollar hegemony & consequently US hegemony & domination over global economy & markets” . Why do I say so? Just have  a closer look on the table & few observations.

·         Is US Fed losing confidence in its own currency ? Does it not consider its own creation US Treasury bills  as a “safe haven” ? Why US Fed has quadrupled its gold reserves in tons in last 8 years , increasing its Gold holding share to almost 80% of its reserves( highest among all big economies)? Does it know something about USD outlook which it is hiding ?

·        Why the developed world & US allies (Germany, Italy, France etc) hold Gold as the major reserve asset/ currency (>75%) ?  Do they not consider USD/T-bills as the safest haven asset?  Has Gold replaced USD/T-bills as the “safest haven”? Do they know something about USD outlook , which other nations don’t know?

·        Why Japan & China has hurriedly reduced their USD/ T bills holdings to half , by massive 1.7 Trill $ in 8 years ? Do they know something more than other nations about USD outlook?

·        Has Gold replaced USD/ T-bills as the safest haven ?  Central banks have been madly hoarding Gold in last decade or more .  Only these top 10 economies have hoarded average of 1000 tonnes of gold every year(@130 billion $ > 3% Indian economy size every year) . No wonder Gold has done so well in last 5 -10 years(15-18% CAGR), better than equities.

·        Why India is still over-invested into T-bills and under-invested into Gold(14% share only) with respect to US & developed nations? Should the RBI wake up and follow the US Fed & developed world ? Are we trying to be “ Holier than Thou” & impressing somebody in US ?

 

This wet my appetite as this will have implications on our investments, asset diversification  & their returns , which I will cover later…  I started digging more into this affair through AI tools like Chat Gpt , Google Gemini to get some credible data & deeper trends through credible sources.

 

·        Share of US treasuries in Global central bank treasuries  has dropped from 72% in 2001 to 62% in 2010 & 54 % now (that’s 18% drop in 24 years@ 0.75% per year) . By this rate , it will be less than 50%(no more majority of reserves) in 5 years(by 2031) and less than 40% in less than 20 years(by 2044) . See the declining trends(Source Chat GPT query)

 

·         While the share of US T-bills have fallen by 8% (from 62 to 54%) in last 15 years in central bank reserves, Gold holdings% has gone up by 6% (from 10% to 16%) .Has Gold replaced US T-bills as the “safest haven” ?No wonder, Central banks have been madly hoarding Gold in last decade or more . Only these top 10 economies have hoarded average of 1000 ton of gold every year(@130 billion $ at current prices). No wonder Gold has done so well in last 10 years(15% CAGR), much better than equities (Nifty at 12% & NYSE at 11% in 10 years). Pl see graph below(Source Chat GPT)

 

·        Foreign investor share of US Treasury holdings have reduced from 50% in 20008 to 30% in 2025 , including the major holders like Japan & China, which have almost halved their US T-bill holdings since 2017 by about massive 1.7 Trillion $ ( Pl refer the first table in the blog).

 

 

·        Even the share of USD in global transactions (trade , Forex and capital ones) have come down from 52% to 42% in 2 decades(2004 to 2022) , which is measured by SWIFT payments(inter bank transactions). This shows that share of Dollar/ T bills coming down for both reserve currency as well as transaction/ trade currency.

 

This led me to think & research more about USD outlook & its implications on our investments, asset diversification  & their returns. I had raised concerns about strength of US economy & USD earlier too in my blog recently (late September) with the headline.

 " Interesting Global marathon for economic & market power between 3 players - US , China & India" 

I am putting the blog link here ..

https://indiavalueinvesting.blogspot.com/2025/09/interesting-global-marathon-race-for.html

 

Putting some relevant portions from the blog on US economy & equity markets related concerns..

“For over a century, the U.S. economy has been the backbone of global growth and financial markets. Even today, it accounts for nearly 25% of global GDP and houses the world’s deepest & most liquid capital(bonds, T bills & equity) markets. 

 

•             Strengths: The U.S. thrives on its innovation engine — Silicon Valley, biotech hubs, green energy, and AI leadership. Consumer spending, which makes up about 70% of GDP, continues to power growth. Institutions remain strong, attracting global capital.

•             Challenges: The fiscal debt burden is climbing above 125% of GDP, demographics are aging, and productivity growth is uneven. Rising geopolitical competition also weighs on its long-term outlook. Other nations & central banks  are slowly but steadily moving towards de-dollarization & chosing Gold as the safest haven, instead of USD/ T Bills in earlier times , which could challenge the Dollar status as world reserve currency. Another big risk is heavy concentration of market growth in a handful of large tech companies, often referred to as FAANG or the "Magnificent Seven". The top 10 stocks, primarily tech giants, can represent over 37% of the S&P 500's total value. The "Magnificent Seven" (Google, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have driven a majority of the S&P 500's gains in recent years. This creates a scenario where if these stocks perform well, the index looks healthy, even if the other 493 companies are struggling. This masks broader economic weakness.” Magnificent seven stocks are mainly going up , based on their AI related investments and earnings projections ( accounting for >50% of market cap gains of S&P 500 this year )and hence their could be a bubble/ over-hype  situation , if  they don’t deliver on AI projections.”

---

US Dollar as a Global Reserve Currency

The USD remains the preeminent reserve currency, comprising approximately 54% of disclosed global official foreign reserves as of 2025, far surpassing the Euro (≈20%) and others. However, its share has been on a gradual, long-term decline from a peak of 72% in 2001 to 54% now & probably less than 40% in next 20 years( as per the current trends).

Key Long-Term Risks to Dominance (Erosion of Trust)

• US Fiscal Health: The biggest structural risk is the US's growing national debt(at 38 Trillion $@125% of GDP) and persistent fiscal deficits (projected at ≈6.5% of GDP). This can undermine the "safe haven" status of the USD and US Treasury securities, potentially leading to a higher cost of borrowing or a weaker dollar if the Federal Reserve is compelled to intervene.
• Diversifying central bank reserves: Growing concerns on dollar stability & US fiscal health has led to central banks reducing their USD/ T-bill holding from 72% to 54% (last 24 years) and increasing their other categories (primarily Gold @16% and Euro@20% share)
• Weaponization of the Dollar: The use of financial sanctions (e.g., against Russia) has prompted some countries, particularly strategic rivals and certain emerging markets, to actively seek alternatives for trade and reserves to reduce their vulnerability.
• BRICS challenge – As of 2025 , 10 BRICS countries( Led by Brazil , Russia, India , China , South Africa) & 13 partner nations are developing the BRICS Bridge payment network to settle transactions using Central bank digital currencies. This might become a big challenge to USD hegemony in future.
• Political Instability: Increased political polarization and recurring issues like debt limit confrontations in the US ( leading to current US Fed govt shut down) can raise doubts about the stability of US governance, which is a core pillar of the dollar's credibility.

 

 

Key Factors Supporting Dominance (Structural Advantages)

• Deep and Liquid Markets: The sheer size, openness, and sophistication of US financial markets (equities and bonds) are unmatched globally. This provides the world with a vast supply of safe, liquid, dollar-denominated assets, which no other currency can currently rival.
• Network Effects: The dollar's dominance is deeply entrenched in the global financial architecture (banks, clearinghouses, and payment systems). The cost and institutional shift required for countries to fully divest are prohibitively high, creating a strong inertia that favors the USD.
• Lack of a Viable Alternative: The decline in the USD's share has not led to a corresponding surge in a single competitor ,like the Euro or the Chinese Renminbi( which currently holds only ≈2% of reserves). Instead, reserve managers are increasingly diversifying into Gold(from 10% to 16% in last 15 years) & a wider range of smaller, "nontraditional" currencies (e.g., Australian Dollar, Canadian Dollar).
• Rule of law and institutional depth: US legal, regulatory and financial infrastructure (settlement, custody, accounting standards) Favors USD usage.

 

---

🌍 US Dollar as a Global Trading Currency

The USD's role as a medium of exchange and unit of account in international trade is also likely to remain dominant but face gradual erosion from de-dollarization efforts and technological advancements. Share of USD in global transactions (trade , Forex and capital ones) have come down from 52% to 42% in 2 decades(2004 to 2022) , which is measured by SWIFT payments(inter bank transactions). Hence, it has already lost its majority share(>50%) of all SWIFT transactions(Trade related, Forex deals & capital flows)

 

Factors Causing Erosion

• Commodity Pricing: There is a visible, growing trend of commodity contracts, particularly in energy, being priced in non-dollar denominations as countries like China and Russia push for alternatives.
• Regional Trade Blocs: A global shift towards greater geo-economic fragmentation and the formation of regional trade blocs could lead to more trade being invoiced in the currencies of the dominant regional economies, diminishing the USD's role.
• Digital Currencies (CBDCs): While private cryptocurrencies like Bitcoin are not seen as a threat to reserve currency status, the development of Central Bank Digital Currencies (CBDCs) by other major economies (which the US has been slow to pursue) could eventually offer an alternative for cross-border financial transactions.
• Growth differentials: Faster growth in Asia (China, India, ASEAN) increases trade and financial flows in non‑USD currencies over time.
• Rise of alternatives: Euro, Chinese renminbi, and basket/Special Drawing Rights (SDR) can grow share, especially regionally; but each has material constraints.
• BRICS challenge – As of 2025 , 10 BRICS countries( Led by Brazil , Russia, India , China , South Africa) & 13 partner nations are developing the BRICS Bridge payment network to settle transactions using Central bank digital currencies. This might become a big challenge to USD hegemony in future.

 

Sustaining Factors

• Trade Invoicing: A large majority of global trade, even between non-US countries, continues to be invoiced in US dollars, sustaining high global demand for the currency.
• SWIFT System: The USD remains the most dominant currency in the SWIFT global interbank payment system, indicating its ongoing role as the primary medium of exchange.

 

Key risks that could accelerate USD decline

• A sustained loss of confidence triggered by runaway inflation, US fiscal crisis, or inability of the US to roll/refinance debt at affordable rates.
• A concerted geopolitical/financial bloc formation like BRICS etc that shifts trade and reserves to another currency or basket.
• Rapid, large‑scale liberalization and internationalization of China’s financial system combined with confidence in Chinese institutions.

 

---

Is this is the beginning of end of Dollar hegemony & consequently US hegemony & domination over global economy & capital markets” ? Lets not forget that we had such changes in Global Foreign reserve currency  & trading currency earlier too( from Portuguese Real in 1450s  to Spain Dollar  in 1530s  to Dutch in 1640s to British Pound in 1780s  historically). Last such change was in 1944 at Bretton Woods meeting with Global reserve & trading currency passing from British Pound to USD , after Britain almost bankrupted after the 2 world wars with Debt/ GDP > 250% . Is USD going the same route in 1-2 decades? Is this the beginning of the end?

 

what is current outlook for US Dollar as a global reserve currency & trading currency for long term(next 10-20 years)?

The long-term outlook (next 10-20 years) for the US Dollar (USD) as the world's primary global reserve currency and trading currency suggests a future of gradual decline in its market share but continued dominance due to structural advantages for probably 1-2 decades . A dramatic or sudden "de-dollarization" event is widely considered unlikely, but the system is evolving into a more multipolar financial system.

The most likely scenario over the next 10-20 years is a "rising tide" where other currencies gradually gain share due to global diversification and the strengthening of their own financial markets, rather than a rapid, shock-driven "unforced error" where the US abruptly loses confidence due to its own actions. The USD will likely remain primary, but with a diminishing share of the global pie.

 

 Some issue/concerns on recent US equity market trends.

·        Big risk is heavy concentration of market growth in a handful of large tech companies, often referred to as FAANG or the "Magnificent Seven". The top 10 stocks, primarily tech giants, represent over 37% of the S&P 500's total value. The "Magnificent Seven" (Google, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have driven a majority of the S&P 500's gains in recent years. This creates a scenario where if these stocks perform well, the index looks healthy, even if the other 493 companies are struggling

 

·        Magnificent seven stocks are mainly going up , based on their AI related investments and earnings projections (contributing 45-50% of market cap gains of S&P 500 this year )and hence there could be a bubble/ over-hype  situation of they don’t deliver on AI projections.”

 

·        US market cap/GDP ratio(favourite Warren Buffet indicator measuring over-valuation at >100%) has touched a record 222%( 67 Trillion market cap to 30 Trill GDP). This is definitely in over-valuation zone(bubble zone for any other country)

 

·        Is Hyper expectations(hype) over AI leading to bubble in US markets?

 

Pl look at the table below from Economic Times( this week)

Just these Big tech club of 5 companies(Nvidia, Apple, Microsoft, Google/Alphabet & Amazon) , together command a market cap of 18 Trillion(about one third of S&P 500 index market cap) and gained 3.3 Tril (22% up) , representing 40% of market cap gains this year. And all these Big 5 companies are growing on AI related expectations/hype .  Leading US Tech companies have pledged more than 500 Bill $ on AI & data centre investments in 2025 , with projected AI revenues at 217 Bil in 2025 and >1300 Bil in 2032(6.5 times growth in 7 years) , which is > 30% CAGR on revenues in 7 years , which looks like a tall order . What if AI led growth turns out to be a over hyped and bubble ? How will it impact the markets , when market starts looking for projected revenue growth , profitability & cash flow versus real numbers , in few quarters? Would it lead to US market crash , which will have negative impact on other national markets too ??

 

Implications for investors and policymakers

• Investors including retail ones: Review USD assets as core safe‑haven exposures & consider FX diversification benefits — consider allocation to non‑USD assets, hard assets (gold), and regionally balanced portfolios. Hedge USD exposure where appropriate for specific liabilities. Retail investors , specifically ,should be mandatorily investing at least 10-20% of their portfolio on Gold ETF ( It has given better returns in last 5 to 10 years@ 15-18% than equities( Nifty @ 12% & NYSE at 11% CAGR in last 10 years)
• Corporates: Prepare for more multi‑currency invoicing and hedging, especially in Asia‑centric trade.
• Policymakers: US should address long‑run fiscal/debt sustainability, maintain deep markets, and manage geopolitical relationships to preserve dollar credibility. Other countries wanting greater currency internationalization must liberalize capital accounts, strengthen legal/financial institutions, and build market depth. RBI should be significantly increasing its Gold holdings to few more times than current 14% , like US & other big developed countries.

• Indian economy & equity markets are on the threshold of doing very well /outperforming in medium term (next 1-2 years) as well as long term , after consolidating in last 12 months.  I have given some relevant recommendations including some strong sectors and trends for India  in my last blog . Putting the link below

https://indiavalueinvesting.blogspot.com/2025/10/current-equity-market-outlook-abhi-to.html

 

Hope you found it interesting , productive & useful. Pl provide your feedback/inputs

Happy Investing.

Cheers

Amardeep

 

Read More

Current equity market outlook – Abhi to party shuru hui Hai - Diwali wali ( Party has just started)😎

 

 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. By the way , I have become a consistent equity investment blogger( my passion) since start of this year , after a gap of few years , after starting to blog in 2011. Pl check my earlier & recent blogs @ Value Investing in Indian markets 

---

---

---

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 (@ 4%) , 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 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.

Happy Diwali & Happy Investing 😊

Cheers

Amar

5

Read More

Interesting Global marathon race for economic & market power between 3 runners - US , China & India – Who wins? Long term economic & market returns outlook

Interesting Global marathon race for economic & markets power between 3 runners - US , China & India – Who wins?  Long term economic & market returns outlook 

       Hey friends, my passion for equity market watching and long-term equity investing, made me an avid watcher of leading economies also (market watcher turning into an interested economist 😊) as both are linked in long term . For example, I recently was the lone wolf crying that India will do about 8% growth in FY26(since beginning of this year), while big institutions like world bank , IMF & own RBI with all the data , resources and models incorrectly predicted that Indian economy is slowing down at 6.2 to 6.5% for FY26  , with potential slowdown in corporate earnings , leading to FII exit and markets correcting badly  . I stood correct when the actual numbers of Q1 of 2026 came at 7.8% .

     

  While , Over short term , one might not see strong co relation between economy & markets cause of short sighted and overreactive market participants😊, both show a good co-relation in long term. Benjamin Graham...guru of Warren Buffet used to say that  " markets are voting machine in short term & weighing machine in long term" 😁. In long run , GDP growth correlates with corporate earnings growth which in turn corelates with market/ index  returns . For example in India , nominal GDP growth ( real GDP plus inflation) has been about 12 % in last  25 years , leading to about 15% earnings growth for Nifty 50 companies which is turn have generated 14-15 % returns ( including dividends) for Nifty 50 index.  

Picture a global marathon with three very different runners.

The United States is the seasoned veteran — tested, resilient, and still holding pace even after decades of leadership. China is the strategist — disciplined, powerful, but carrying extra weight from past choices with age catching up. And then there’s India — the rising challenger, youthful and full of energy, sprinting with ambitions to catch up & vanquish the rivals

This marathon is the race for medium- and long-term economic growth and equity market returns. Each of these economies offers unique strengths and faces pressing challenges. Together, they define the trajectory of global markets in the next 10–30 years.

________________________________________

United States: The Resilient Veteran

For over a century, the U.S. economy has been the backbone of global growth and financial markets. Even today, it accounts for nearly 25% of global GDP and houses the world’s deepest capital markets. 

• Strengths: The U.S. thrives on its innovation engine — Silicon Valley, biotech hubs, green energy, and AI leadership. Consumer spending, which makes up about 70% of GDP, continues to power growth. Institutions remain strong, attracting global capital.

• Challenges: The fiscal debt burden is climbing above 125% of GDP, demographics are aging, and productivity growth is uneven. Rising geopolitical competition also weighs on its long-term outlook. Other nations & central banks  are slowly but steadily moving towards de-dollarization which could challenge the Dollar status as world reserve currency. Another big risk is heavy concentration of market growth in a handful of large tech companies, often referred to as FAANG or the "Magnificent Seven". The top 10 stocks, primarily tech giants, can represent over 37% of the S&P 500's total value. The "Magnificent Seven" (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have driven a majority of the S&P 500's gains in recent years. This creates a scenario where if these stocks perform well, the index looks healthy, even if the other 493 companies are struggling. This masks broader economic weakness

• Equity markets: Despite concerns, U.S. equities have delivered an impressive 10%+ annualized return over the last century. In the next decade, returns are likely to moderate, but 6–8% annualized growth remains plausible, underpinned by innovation-driven companies, banking on IT and AI push.

The U.S. may no longer sprint, but it has mastered the art of consistent long-distance running.

________________________________________

China: The Strategist at a Crossroads

China’s economic story has been the most dramatic in modern history — lifting over 800 million people out of poverty and becoming the world’s second-largest economy in just four decades. But the marathon has hit a rough patch.

• Strengths: China still leads in manufacturing scale, supply chain dominance, and green energy investments. It has also nurtured global giants in e-commerce, EVs, and renewable technology. Its growing middle class remains a powerful consumer base.

• Challenges: The key property/real estate sector is under severe debt crisis(e.g. leading builder like Evergrande defaulted over $300 billion), demographics are in decline(population shrank in 2022 for the first time in 60 years with median age at 39 years w.r.t. to 28 for India), and private enterprise faces tighter regulation. Foreign investors are cautious due to policy unpredictability. The overall debt-to-GDP ratio remains high at 270%, necessitating caution. Inflation remains subdued at around 1%(almost deflation) which is not  a good sign for a strong & growing economy. Manufacturing is showing a contraction for last 5 months(PMI below 50) , which is again pointing to slow down.

• Equity markets: Chinese equities have been highly volatile, often moving with policy cycles. While long-term potential exists in technology, green energy, and consumer upgrades, the medium-term outlook depends heavily on reforms and confidence-building measures.

China remains a strategist who can win bursts of speed — but whether it stays competitive in the long haul depends on its willingness to adapt..

________________________________________

India: The Rising Challenger

India is the youngest of the three runners, with over 65% of its population under 35. Its marathon has just begun, but the momentum is building quickly.

• Strengths: India combines demographics, digital transformation, and reforms to create a powerful growth cocktail. From UPI’s digital payments revolution to rapid infrastructure expansion, India is unlocking new engines of growth. Services remain strong, while manufacturing and renewable energy are gaining traction. While PLI (Production linked Incentives) scheme has been successfully firing the manufacturing cylinders, Govt has belatedly but surely started making some strong moves on AI research & semiconductors by deploying many billion$ in AI labs and semiconductor fabs

• Challenges: Infrastructure still lags demand, income inequality is significant, and policy consistency will be crucial. Managing urbanization and job creation for its youth will test its resilience.

• Equity markets: Indian equities have historically traded at higher valuations — often justified by faster growth. Over the next 10–20 years, returns of 12-15% annualized (like earlier) are within reach, though accompanied by volatility and political risks.

India is the sprinter with a long runway — capable of delivering outsized returns, but also vulnerable to stumbles if reforms falter.

 

Here’s the equity market returns chart 📊 comparing the last 20 years of S&P 500, MSCI China, and Nifty 50.

Here’s the demographics chart 🧑‍🤝‍🧑 showing median age vs. working-age population share for the U.S., China, and India.

________________________________________

Comparative equity market Outlook: Who Leads in the Next Decades?

The race ahead is not about one economy winning outright, but about how each contributes to the global growth mosaic.

• United States → Stable, resilient, and still the world’s innovation hub. Expected equity returns: 6–8%.

• China → Uncertain, policy-dependent, but with niche opportunities. Expected equity returns: 5–7% with higher volatility.

• India → High-growth potential, demographic advantage, reform-driven. Expected equity returns: 12-14% with volatility.

 

 

Global megatrends will shape all three:

• Deglobalization and regionalization of supply chains.

• The green transition reshaping industries.

• Artificial Intelligence as the next productivity revolution.

Together, these shifts will decide whether the runners maintain their rhythm or stumble along.

 ________________________________________

Investor Takeaways: Running With All Three

Think back to our marathon. The U.S. runner will likely maintain steady pace. China may sprint or slow unexpectedly, depending on choices ahead. India is accelerating, but needs stamina and consistency.

For investors, the message is clear:

• Diversify across geographies. Each economy has a role to play in balancing stability and growth.

• Focus on themes, not just regions. AI, clean energy, and digitalization will cut across markets.

• Stay long-term. Short-term volatility is inevitable, but the long run rewards patience.

In this marathon of global growth, no single runner defines the race. Instead, the interplay between the U.S., China, and India will set the rhythm of equity markets and shape opportunities for the next generation of investors.

________________________________________

💡 Closing Thought:

The finish line isn’t in sight — because in the global economy, the race never truly ends. What matters is who keeps running, adapting, and pushing forward. For now, the U.S., China, and India remain the three runners every investor must watch closely.  

--------------------------------------------------------------------------------------------------------------------------

 A Bonus shot on the sizes of the 3 economies in 2047(@India’s Independence centenary year)

As per the Govt’s “Vikshit Bharat” vision  claims(Niti Ayog paper) , India would be 30 Trillion by 2047 ,  $3rd biggest economy after US & China( much bigger than German & Japan). This would mean an effective GDP growth rate of about 9.5 % on average. That seems bit on the higher side.

Effective GDP growth rate(in $) = Real GDP growth + Consumer Inflation rate – Currency devaluation ($-INR) 

Currency devaluation is a function of key factors like Inflation differential , Central bank interest rate differential , Trade/ current account deficit , Capital flows , economic growth & crude prices

India has been showing a real GDP growth of 8% on average in last 18 years (Quadrupling  from 1 Trillion in 2007 to 4 Trillion $ economy now) .  The  current inflation estimate for FY26 & FY27( as per RBI) is 3%. Average INR devaluation has been 3% historically. Hence the Effective GDP growth rate in $ in long term should  be 8% , from a historical baseline data perspective( by the above equation). This will take Indian economy to 23 Trillion$ . Effective GDP growth rate (in $ )of 8.5% to 9% will take Indian economy size to 25 to 28 Tril $  but not to 30 Tril $(till we have Cinderella’s magic wand). My take would be that India will grow at 8.5%(effective growth In $), reaching to > 25 $ Trillion(still more than 6 times the current size in 22 years which is huge).  INR devaluation might slow down cause of much lower inflation currently(from 7% to 2-3%) , better FDI flows , better current / trade account deficit(0.2% in last quarter) & solid / steady  economic growth leading to higher effective GDP growth rate of 8.5% . Besides India’s current push on manufacturing(through China plus 1 strategy , PLI scheme & GST tax reforms) will fire an additional lever to push Indian GDP.

China, which is currently growing at 4-5 % ,  is projected to grow at 3 to 4%( real GDP growth rate) , cause of demographics (declining median age , decline in working population%), severe real estate debt crisis , global economy slow down impacting its export oriented economy, internal policy uncertainties , current deflation environment etc. Adjusting near zero inflation and average devaluation of 1% (seen in  last 10 years),its effective growth rate would be 2.5% and GDP @ 25 Tril $ in 2047(19 Tril $ now)

US economy is at 30 Tril $ today . At projected 2% growth rate , it will reach 46 Tril $ and will continue to be the biggest economy . However , by PPP (Purchasing Power Parity) , Indian and Chinese economies will be bigger than US .

Hence India would be the 2nd biggest by 2047 by exchange value (after US & slightly more than China) & biggest by PPP (overtaking US as INR is undervalued by 3-4 times today with respect to PPP). Currently India GDP is 17 Trill (by PPP) , while its >4 Trill by exchange value . This will be an awesome news for all of us that we will soon become the biggest economy by PPP. This bright long term outlook is definitely going to give a boost to long term equity market returns in India.

Cheers. Happy Investing 😊

Read More