“Our market seems to be in a liquid oxygen state,” Gupta said, referencing a movie dialogue to describe the current stagnant conditions. “Valuations are at 22 times one-year forward earnings. Very few stocks are at attractive levels, and earnings growth is pretty pathetic.”
He said large sectors like IT, consumer, and banks are expected to deliver only single-digit earnings growth this year. At the same time, a heavy pipeline of share supply, ranging from recent State Bank of India (SBI) offerings to upcoming initial public offerings (IPOs) and qualified institutional placements (QIPs), will limit upward movement.
Still, local flows are providing downside support. “Money is not going anywhere else. It’s coming into equities,” he said. Factors like potential Reserve Bank of India (RBI) rate cuts, government capex, and a rural recovery post-monsoon could help the economy in the second half, Gupta added.
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On earnings, Gupta said Kotak expects Nifty earnings to grow only 4.5% year-on-year (YoY) for the June quarter, but 11% for the fiscal year 2025-26 (FY26). “That means the next three quarters should see stronger growth. But a lot of it is already priced in.”
According to him, most investors are already expecting weak June quarter results and a second-half rebound. The main market-moving events will be something other than what’s already priced in – like a favourable or unfavourable trade deal with the US, or government action such as retail fuel price cuts, he said.
Commenting on foreign investor sentiment, Gupta said most global investors remain underweight on India due to expensive valuations. India has underperformed the MSCI EM index, he said. “Markets like Korea, Hong Kong, Brazil, and Mexico have done much better,” he said.
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“We would recommend staying away from export-oriented plays like IT, global auto ancillaries, and metals,” Gupta said. “We believe a global slowdown is in the works. China is already slowing down. The US could slow in the second half. So it is better to focus on domestic plays for now.”
For the full interview, watch the accompanying video
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