House View: Markets consolidate, discipline matters

Indian investors are in the habit of buying the dip and that sentiment is likely to continue. However, this can derail if there is any disappointment in expectation of a rebound in corporate earnings, where FY25 was a modest ~3% growth, while FY26 is expected to improve to ~11-12%. Additionally, while recent geopolitical events have had only localized and limited impact on India, any future escalation that directly affects us could pose risks to market stability. That said, as long as corporate earnings remain healthy and investor sentiment stays positive, markets are expected to hold firm. An added tailwind could come from the ongoing trend of de-dollarization. As an import-dependent economy, India stands to benefit from a weaker US dollar, which could further support macroeconomic stability and investor confidence.

Highlights

• Listed Equities: Preference remains with large-cap allocations, given reasonable valuation multiples. The listed equities desk’s base case forecasts a 3%/2% gain in Nifty-50/BSE-500 over 3 months and 7%/9% over a 12-month period.
• Fixed Income: With traditional debt funds yielding 6.5% or less, investors can explore hybrid mutual funds and Special Investment Funds (SIFs) for better post-tax, risk-adjusted returns.
• Private Markets: Attractive valuations make this a favourable time for fresh allocations to high quality fund managers.
• Precious Metals: Given the recent steep rally in gold prices, we expect a phase of consolidation going forward and hence profit booking is warranted for early investors. Silver is also expected to perform well, given the increase in industrial demand amid constraints on supply.
• REITs and InvITs: As traditional debt instrument yields have dropped sharply, investors can look to add high quality REITs which are trading at a discount to their respective NAV along with robust distributions.