Sensex, Nifty may gain 5-8% if external headwinds recede: Baldev Prakash

Baldev Prakash of SBI Securities expects markets to gain 5-8% in the near term if headwinds ease, while large caps could deliver 12% CAGR over the next 3-5 years.

Indian equity markets could witness a recovery if external headwinds ease and crude oil prices fall below $90 per barrel, Baldev Prakash, MD and CEO of SBI Securities, told Abhinav Ranjan in an email interview. He said that the Sensex and Nifty 50 may rise 5-8 per cent in a short period, adding that large caps have potential to deliver 12 per cent annualised returns over the next 3-5 years. Edited excerpts: 

 

Markets have been in a range over the past two years. For how long will this consolidation phase last, and what could lead to a meaningful recovery?

 

Following a 24-month consolidation phase, we expect Indian equities to witness a gradual recovery, with the primary catalyst being a pullback in crude oil prices below $90/bbl. We remain optimistic about the forward outlook and believe domestic equities are likely to deliver better returns on the back of (a) double-digit earnings growth despite a vulnerable external environment; (b) likely conclusion of a trade deal between the US and India, alongside India’s ongoing export basket diversification; (c) reversal of global AI trade, which should redirect capital flows toward well-diversified and emerging markets like India; and (d) likelihood of continued reforms by the government to accelerate economic growth. Additionally, any relief in the taxation pertaining to STT/LTCG would serve as a big sentiment booster for equity markets.

 

Amid heightened geopolitical uncertainties and elevated oil prices, where could Sensex and Nifty head by the end of 2026?

 

If external headwinds recede, frontline indices can deliver returns of 5-8 per cent in a short period of time. This would be driven by short covering and the relative under-ownership of Indian equities within the broader Emerging Markets (EM) basket. We continue to maintain strong conviction in the long wealth creation potential of domestic equities and expect large caps to compound at 12 per cent CAGR over the next 3-5 years. Furthermore, smart investors can generate additional alpha by investing in mid/small cap segment, which has the potential to deliver 15-20 per cent compounded returns in the long run.  Check - TOP GAINERS NSE | TOP LOSERS NSE   

 

Retail investors are in a fix amid prolonged market consolidation. What strategy should retail investors adopt? Can SIPs help them navigate volatility?

 

Investors should avoid the pitfall of trying to time the market. Instead, we advise adopting a market-cap-agnostic, bottom-up approach. It is prudent to form a well-diversified portfolio of 15-20 high-conviction stocks with a minimum investment horizon of 3 years. Diversification is vital to mitigate any unforeseen risks. Investors should avoid keeping all eggs in one basket. Novice investors can adopt the staggered deployment strategy to overcome the current temporary uncertain phase. Accumulating quality stocks can be achieved systematically, either directly via equity SIPs or indirectly through mutual funds.

 

IT is showing early signs of recovery. Is this the right time to turn bullish on the sector? 

 

Tier 1 IT companies have reported a mixed set of results, with soft numbers from players like Infosys and resilient performance by TCS, Tech Mahindra, and HCL Technologies. Conversely, mid-tier companies continue to outpace their large peers, maintaining strong visibility for double-digit growth. Overall FY27 growth outlook continues to remain tepid and is likely to be in the range of low single-digit for Tier-1 players. The recent recovery in the stock prices of IT companies is largely a function of mean reversion. The entire sector was trading at a depressed valuation with a P/E multiple of 12x-14x and an attractive FCF yield of 3-5 per cent.  Additionally, a global rotation out of the crowded AI trades would have led to some inflows into traditional IT services businesses. Overall, we continue to maintain a cautiously optimistic stance on the IT sector and are selectively bullish on specific businesses within the mid-cap space.  

 

How is AI changing the brokerage business, and what investments are you making in this area? Which business segments will drive growth over the next 3-5 years at SBI Securities?  

 

AI will reshape broking through automation of account opening, compliance, operations, and customer support, while enabling personalised portfolio analytics, research, and investor engagement. At SBI Securities, we are investing in AI-led product innovation, behavioural insights and targeted Go-To-Market strategies to improve productivity, optimise turnaround times and strengthen data security. Over the next 3–5 years, we expect growth across all business segments, driven by technology adoption and enhanced customer experience.