Arvind Maheswari, Head of India Equities at the brokerage, said the recent market pullback—triggered by the global AI-led selloff, slowing earnings, and geopolitical tensions—has brought valuations closer to comfort levels. Alongside this, steady domestic inflows, easing external overhangs, and already-reset earnings expectations make the risk-reward more favourable now.
Maheswari said, “While in near term uncertainty still clouds us, but in terms of where valuations are, we feel much more comfortable calling for positive returns from here on.”
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He pointed out that systematic investment plan (SIP) flows continue to remain resilient, providing a strong domestic cushion. At the same time, concerns such as tariffs have eased, and valuations have corrected to near post-COVID lows. This combination, he believes, creates room for positive returns, even if the broader environment remains uncertain.
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He added, “The problem is that India earnings story got decelerated over the last two odd years, and we need that growth story to come back in. We need to see that momentum come back on corporate earnings, and that’s what is going to ultimately drive market returns and foreign flows will follow from that.”
Maheswari noted that foreign outflows seen in recent months are largely a reflection of this slowdown in earnings momentum rather than the primary reason for market weakness. A recovery in corporate earnings, therefore, will be critical for any sustained upside in equities.
BofA has already lowered its earnings expectations for the Nifty, with growth estimates cut to high single digits. Still, the brokerage believes that even a modest improvement from here could support market returns.
With valuations now more reasonable, even a pickup to low double-digit earnings growth could translate into similar returns for the market, with a possibility of some valuation re-rating adding to gains.
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