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Expert view on markets: Saurabh Pathak, Head - Investment Counsellor at Purnartha PMS , believes the Nifty 50 and the Sensex could see 8-10 per cent growth for FY26. He, however, added that he expects digit growth in select pockets and not throughout all sectors. In an interview with Mint, Pathak also discussed the sectors he is positive about, as well as the mid-and small-cap segments.
Here are edited excerpts of the interview: What is your outlook for the stock market in FY26 amid the ongoing turmoil? In the last month of FY25, the Nifty 50 and Sensex recovered approximately 6 per cent. I expect this positive index movement will be maintained, and both indices could see 8-10 per cent growth for the financial year 2026. This expectation is supported by large-cap earnings for the financial year, with their valuations currently close to or below their three-year historical average.
Within Nifty, sectors like banks, refineries, construction, and Telecom will likely grow with double-digit earnings rates. Additionally, an expectation of GDP growth of 6.5 per cent and anticipated interest rate cuts should create a supportive environment.
We see double-digit growth in buckets, not throughout all sectors. How has the Trump tariff impacted the Indian stock market? Donald Trump has imposed a 26 per cent tariff on India. Fully grasping the sectoral impact requires more than surface-level thinking.
It will take some time as more information emerges. Sectors like pharmaceuticals, semiconductors, copper, and energy commodities such as oil, gas, coal, and LNG are currently exempt from the tariff. To gauge the impact accurately, we must wait and see the extent of retaliation from other nations.
If they start negotiating with the US, the entire structure must be rethought. Setting this aside, India still holds a competitive advantage over rivals like China and other Asian nations, as these countries have received a higher duty rate. India's exports to the US accounted for approximately 2.
2 per cent of GDP in 2024, so the tariff may not pose a significant problem. India is already discussing increasing two-way trade with the US from $190 billion to $500 billion by 2030. Another perspective suggests that India could benefit from trade diversions, with US buyers seeking alternatives.
In short, there are near to mid-term positive and negative impacts, which may change as ripple effects emerge. I anticipate near-term volatility in the Indian stock market, primarily due to two factors: the commencement of the Q4FY25 earnings season and the ongoing emergence of more information regarding the tariff impact analysis over the next few weeks. What are your expectations from RBI MPC? Will a 25-bps rate cut be a significant boost to market sentiment? I believe the Monetary Policy Committee (MPC) is now focusing more on the country's growth rather than being overly concerned about inflation.
It is expected that inflation may remain within the Reserve Bank of India's (RBI) comfortable range for the coming quarters. The sustained decline in food and beverage prices has contributed to the lower inflation rate observed in February 2025. According to the India Meteorological Department (IMD), there is a 60 per cent probability that conditions will shift back to ENSO-neutral conditions (neither El Niño nor La Niña) during March 2025, increasing to 70 per cent for April-June 2025.
This means India will experience normal monsoon rainfall without significant droughts or floods, allowing the committee to consider another 25-basis point cut. What sectors are you positive about for the medium term? At Purnartha, we aim to construct a portfolio that mirrors India's growth, focusing on companies with the potential to support and capitalize on this expansion. As bottom-up portfolio managers, we continuously search for businesses capable of sustaining 18 per cent to 20 per cent earnings growth across all three strategies, allowing for higher portfolio allocation.
Considering current market volatility and macroeconomic events such as interest rate adjustments and tariff changes, defensive sectors like pharmaceuticals, FMCG (fast-moving consumer goods), and IT may warrant consideration. Do we have valuation comfort in mid and small-caps? Should we increase exposure to them? As I mentioned, in the current market scenario, a bottom-up approach is essential, focusing on companies with strong fundamental growth and sustainability and, ideally, scalability. Valuations in the mid and small-cap sectors still appear elevated compared to their three-year averages.
However, we have observed significant valuation drops in a select group of companies over the last six months, even those with healthy order books. I want to emphasise these specific pockets and companies, which have growth visibility and have experienced sharp valuation declines recently. Their ability to grow in terms of revenue and profitability will be the key driver in this volatile market.
It is important to include mid and small-cap companies in a portfolio, but only with appropriate allocation and valuation comfort. What is your view on the current trends of the Indian economy? How should investors play the India growth story theme? We consider the current volatility a knee-jerk reaction, but we continue to focus on the bigger picture of India as a growth story. We, along with the rest of the world, have increased confidence in India’s projected 6.
5 per cent GDP growth over the next three to five years. The interest rate cycle has begun, and its pace will help boost economic growth. The four-engine budget for 2025-26, a stable government, and lower Brent crude prices expected to remain in the near term are all positive indicators.
Tax relief of up to 12.75 lakh on income in the new regime for a large number of individuals, along with increased religious spending, will significantly impact the economy. Religious travel propelled by Maha Kumbh 2025 is a prominent example to consider.
It is very simple to play the India growth story by observing three drivers: growth visibility, sustainability, and scalability of the business. R ead all market-related news here Read more stories by Nishant Kumar Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint.
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