Anand Rathi Advisors’ Mayur Shah also expects a breach of previous highs in Samvat 2083, with the revival seen to be faster in case the geopolitical issues resolve and global energy supply sees some mean revision.
“Investors should moderate their return expectations. We expect the Nifty to deliver single-digit returns over the next one to two years, reflecting the challenges posed by elevated global and domestic bond yields, foreign investor outflows and relatively subdued earnings growth,” he opined.
Sensex and Nifty have been in a consolidated mode for over two years now, with both indices down 4 per cent during this period (between November 1, 2024 and November 2, 2026). Meanwhile, in the ongoing Samvat year, they have lost 9 per cent.
What could drive market rebound?
Going ahead, analysts believe the market’s recovery will likely be led by earnings improvement and selective valuation re-rating rather than a substantial expansion in benchmark multiples.
“A healthier index composition, stronger earnings contribution from growth sectors and reasonable forward valuations should support a gradual rerating, provided macro conditions remain stable and corporate earnings delivery improves,” Bolinjkar said.
He sees index churn to drive Nifty’s earnings performance, wherein slower-growth businesses, particularly select OMCs, will lose relevance over time, while higher-growth companies from capital goods, automobiles and pharmaceuticals would gain representation.
Alongside, he noted that Nifty currently trades at around 19.6x trailing earnings, while Ventura estimates the forward valuation of a revamped, higher-growth index closer to 17x earnings.
Analysts also expect significant divergence across sectors and companies even as a sustained recovery is possible. Investors should therefore, said Jain, focus on identifying businesses that can deliver consistent earnings growth at reasonable valuations.
The prolonged correction in several large-cap stocks has created opportunities for long-term investors, analysts opined, but added that the market is not uniformly inexpensive, particularly across pockets of the mid- and small-cap universe.
Elevated bond yields in India and globally could continue to compete with equities for capital. Sustained FPI outflows, rupee depreciation, elevated crude oil prices and geopolitical uncertainty remain key risks.
Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.
