According to Elara Capital's Harendra Kumar, India's stock market is entering a very strong recovery phase with the Nifty expected to climb 17 to 20% over the next 12 to 18 months. As reported by CNBC TV18, Kumar highlighted that India's demonstrated ability to manage crude oil prices as high as $120 a barrel without derailing the economy, with the country weathering two energy shocks in recent years while maintaining financial stability.
The recovery outlook is supported by the rupee stabilising at 97 to the dollar, a level helped by measures from the Reserve Bank of India (RBI). According to Kumar's analysis reported by CNBC TV18, his team studied the last two or three cycles of sharp rupee depreciation, which typically prompted foreign investors to pull money out of emerging markets. Once the currency stabilises, a reflation trade tends to follow, with Kumar noting that oil marketing companies (OMCs) were the main laggards in the recent quarter.
Kumar favours mid-caps, autos, power and fintech platforms over private banks, citing a structural shift in profit pools across India's financial sector. As reported by CNBC TV18, he named consumer discretionary spending as a theme expected to persist for six to eight quarters, describing the Goods and Services Tax (GST) 2.0 reform as a phenomenal success that has helped fast-moving consumer goods companies post double-digit revenue growth. Within autos, he pointed to demand revival at Eicher Motors and continued strength at Bajaj Auto, while flagging e-commerce platforms as behaving increasingly like FMCG companies.
Kumar dismissed concerns about overvaluation in the power sector, pointing to India's plan to build 100 gigawatts of nuclear energy capacity, of which state-run NTPC will account for roughly 30%. According to CNBC TV18, he said this shifts such companies from being viewed as regulated utilities to growth stocks, with a corresponding re-rating in valuation multiples. The power sector's expansion is expected to boost demand for capital goods companies, an effect already visible in results from Siemens and ABB.
Kumar expressed caution on private sector banks, citing declining return on equity (ROE) as the sector's products become more commoditised. As reported by CNBC TV18, he noted that HDFC Bank's ROE has fallen to around 15% from roughly 25% in the past. Instead, he said the profit pool is shifting toward non-banking financial companies (NBFCs), fintech firms and wealth managers, with Kumar favouring auto and commercial vehicle financiers over gold financing companies.
