According to Hitesh Zaveri, Head of Listed Equity at Axis AMC, the current market environment presents reasonably balanced risk-reward for long-term investors, though not outright compelling in the near term. As reported by The Economic Times, markets have delivered strong returns over the past 12-18 months, leading to pockets of stretched valuations, especially in the broader market. However, India's structural growth story remains intact, driven by strong domestic demand, improving balance sheets, and policy continuity.
The financial sector continues to demonstrate structural strength, supported by healthy balance sheets, moderating credit costs, and stable credit demand. According to Zaveri's analysis, while liquidity conditions have tightened somewhat, this reflects normalization rather than stress. Banks, particularly large private sector banks, are well positioned given their strong liability franchises, while NBFCs may face margin pressure from funding costs but should continue steady growth through strong risk frameworks.
At this market cycle stage, large caps offer relatively better risk-reward compared to mid- and small-caps due to more reasonable valuations and better earnings visibility. As reported by The Economic Times, mid- and small-caps present selective opportunities in niche segments, but the margin of safety has reduced significantly in several pockets. Earnings growth has been strong in the mid- and small-cap space, but valuations in certain segments price in continuation of very high growth rates, with dispersion between winners and losers likely to increase.
The IT sector currently operates in a transition phase with near-term demand softness due to global macro uncertainties. According to Zaveri's assessment, this has led to more reasonable valuations compared to historical averages. For long-term investors, selective exposure to high-quality IT companies with strong client relationships and differentiated capabilities can be considered, despite the sector not seeing immediate growth acceleration. The IT sector remains structurally important as part of India's export story.
For a 3-5 year investment horizon, investors should focus on building a diversified portfolio anchored around high-quality compounders with balanced allocation between large caps and selectively chosen mid-caps. As reported by The Economic Times, Zaveri recommends staying disciplined with asset allocation and avoiding overexposure to overheated segments. The near-term momentum may face periods of consolidation or volatility, with sustainable market trajectory ideally led by earnings growth catching up with valuations rather than continued multiple expansion.
