'Our fair price on Nifty50 is around 28,000 over the next 12 months'

The market is factoring in approximately 14 per cent earnings growth for the Nifty50 for FY26, according to Equentis Wealth Advisory Services

Corporate results for the March 2025 quarter have not disappointed. JASPREET SINGH ARORA, chief investment officer at Equentis Wealth Advisory Services, tells Sai Aravindh in an email interview that the market is factoring in approximately 14 per cent earnings growth for the Nifty50 for FY26 despite multiple earnings downgrades over recent quarters. Edited excerpts: 

Did the fourth-quarter earnings meet your expectations? What is your outlook for the financial year 2026?

India Inc's Q4 FY25 earnings have been largely mixed. Around 50 per cent of Nifty50 companies exceeded street expectations, nearly 30 per cent missed estimates, and the remainder delivered neutral results.

 

The Nifty50 (excluding financials) reported an 8 per cent year-on-year (Y-o-Y) revenue growth, while profit after tax (PAT) rose by 4 per cent, primarily driven by cyclical sectors. Strong earnings were seen in banking, pharmaceuticals, cement, and metals, whereas automobiles, consumer discretionary, and FMCG sectors posted modest performance. The information technology (IT) services sector experienced a muted quarter. Following the Q4-FY25 results, earnings for FY26 have seen a downgrade of roughly 2 per cent.

 

The market is factoring in approximately 14 per cent earnings growth for the Nifty50 for FY26 despite multiple earnings downgrades over recent quarters. We view this as a positive signal amid the current uncertain macroeconomic environment, marked by lingering global trade tensions and geopolitical risks that could weigh on India’s export-oriented sectors. On the upside, a strong projected GDP growth of around 6.5 per cent and moderating inflation are expected to create a conducive backdrop for increased consumer spending and investment activity.  

What potential triggers could support the bulls from here?

The Q4-FY25 earnings have not been disappointing as was the case in earlier quarters. So the immediate potential triggers would be continuation of inline or above estimates quarterly performance of India Inc. in FY26, besides the support from flows from both DIIs and FIIs.

 

Above normal monsoon, softness in crude prices, dip in inflation rates and continuation of rate cuts by RBI will also aid the earnings profile. A benign volatility index and US Dollar Index hovering majorly below 100 also augurs well for India equity market outlook.

Which sectors do you believe are best positioned to lead the next leg of the rally?

Our largest confidence is in BFSI followed by Consumer-Discretionary, FMCG, Telecom, and Healthcare with focus on hospitals and domestic-facing pharma companies. Cement, specialty chemicals and select pockets in building material and metals can be underdogs given scope of earnings surprise. 

Do you still see value in defence stocks?

The Nifty Defence Index has surged 67 per cent from its lowest point on March 3, 2025. A significant catalyst was the launch of ‘Operation Sindoor’ on the night of May 6, 2025. While the sector’s tailwinds remain strong, investors seeking to capitalise on this growth should maintain a cautious approach given the sector’s sharply elevated valuation.

How do you view current valuations in the Indian market?

Nifty is currently trading at 21.5x FY26 earnings per share (EPS) and 18.5 FY27 EPS, which is neither in an overvalued zone nor a valuation that offers high margin of safety. Given the various macro and micro tailwinds and high possibility of double-digit growth in next two years, our fair price on Nifty50 is around 28,000 over the next 12 months. Given India’s resilience of earnings amidst tariff war globally and ability to grow the fastest among large economies globally justifies the prevailing valuation levels.

How should retail investors hedge against global risks?

The basic tenets of investment would hold well in the current environment as well. We recommend investing with a long-term view in companies which have good earnings growth potential and robust cash flows, balance sheet backed by agile promoters. Staggered buying approach can be adopted in stocks which are in a relatively high valuation zone and keeping 10-15 per cent cash can also be considered by investors with low risk appetite. 

Is the wealth management and PMS industry heading for consolidation?

Despite growth in the last two decades, the penetration of most financial products in India like demat, mutual funds, insurance etc. is in the low single digit. Also the disparity in income/household wealth in India has resulted in the top bucket in the pyramid taking 5 per cent share while bottom taking 35 per cent. The Upper mid and lower mid in the income pyramid occupies about 60 per cent. This then implies there is enough opportunity for multiple players to operate in the wealth management space and PMS without a need for consolidation. Select mergers and acquisitions will continue to happen based on the aspirations of certain promoters to exit, or partners with a large player to reap benefits of economies of scale.