According to ET Now, Karthikraj Lakshmanan, Senior VP and Equity Manager at UTI AMC, believes the market lacks a clear upward trigger despite positive macro indicators and in-line Q3 earnings. Speaking in an exclusive interview, Lakshmanan emphasized that sustained fundamental strength and accelerating earnings growth into FY27 will ultimately drive the next market rally, rather than unpredictable foreign institutional investor (FII) flows. As per Alchemy Capital's Alok Agarwal, following a 1.5-year consolidation that saw the Nifty 500 drop 15%, signs of a reset are emerging with compressed valuations and policy support creating favorable conditions for the next phase.
As reported by ET Now, Lakshmanan noted that FY25 and FY26 saw single-digit earnings growth, but FY27 is expected to see double-digit growth due to normalising inflation and a pick-up in GDP. The positive earnings trajectory is expected to provide the fundamental support needed for sustained market momentum. According to Alchemy Capital, Corporate India delivered its fourth consecutive quarter of double-digit earnings growth, with 19 of the 27 sectors in the Nifty 500 posting double-digit growth. This breadth signals the earnings recovery isn't confined to a handful of winners but is spreading across the economy, with metals leading the charge with profits surging 33% year-on-year.
According to the interview, large caps appear more attractive than mid and small caps in the current market environment. Lakshmanan highlighted that financials, especially private banks, offer attractive valuations due to strong growth runways, healthy asset quality, and being past the rate cut cycle. In the IT sector, valuations have become attractive after recent corrections, with many large companies trading at pre-COVID levels. As per Alchemy Capital, PSU and Regional Private Banks offer compelling value as a turnaround story reaches maturity, with PSU bank net NPAs having improved dramatically and regional private banks gaining share in underbanked markets.
As reported by ET Now, while the capital goods sector has performed well post-COVID with continued government capital expenditure and private sector contribution pickup, valuations are now expensive and require selective investment. In the consumption space, discretionary segments are expected to have higher growth prospects than FMCG or staples, with the foods sector structurally positioned for higher growth compared to other categories. According to Alchemy Capital, precious and non-ferrous metals stand out as structural beneficiaries of de-dollarisation trends and AI infrastructure boom, with gold holdings in central bank reserves surpassing US Treasuries for the first time in nearly 30 years.
According to the interview, the market has seen some correction, particularly in the IT sector due to headwinds, but fundamentals remain strong. Lakshmanan noted that selective opportunities exist in mid and small cap companies where valuations are reasonable compared to their growth potential, especially after silent corrections from their highs. The Nifty Smallcap 250 Index has been underperforming since September 2024, down 8% while the Nifty 50 delivered just 7% PAT growth - its seventh consecutive quarter of single-digit earnings expansion. As per Alchemy Capital, the bulk of correction is over with the Nifty IT Index trading at an eight-year low relative to the Nifty 500, creating asymmetric risk-reward dynamics for quality franchises.
