 "Sandeep Nayak, executive director and chief executive officer at Centrum Broking")
Even as the markets prepare for the new financial year, SANDEEP NAYAK, executive director and chief executive officer at Centrum Broking, shares insights with Puneet Wadhwa in an email interview. He discusses how the ‘Trump reset’ is not yet fully reflected in the markets and that its full impact will become clear over the next quarter in terms of its effect on countries and sectors globally. Edited excerpts:
What’s your outlook for the Indian stock markets for 2025-26 (FY26)?
The outlook for Indian equity markets is constructive. The gross domestic product growth for FY26 is estimated at around 6.5 per cent, and the earnings growth for Nifty for FY26, based on consensus estimates, is around 10 per cent. The valuation of Nifty, at just under 20x forward, is slightly below long-term averages. However, at the headline level, the markets seem fairly valued.
Two approaches will be critical for outperforming in the year ahead: first, bottom-up stock selection in growth sectors of the Indian economy, and second, leveraging volatility and correction phases to add fundamentally solid stocks where price declines do not reflect any change in company fundamentals.
Domestic factors are largely priced in. However, the Trump reset is not yet fully priced in, and its full impact will become clear over the next quarter in terms of its effect on countries and sectors worldwide.
Given the posturing by the US president on tariffs and reciprocal tariffs, it’s too early to say if the worst is behind us. However, such disturbances are likely to be short-lived and could be seen as opportunities to strengthen equity portfolios.
Are the risks for the markets more from global developments or local?
India’s growth outlook has improved, supported by high-frequency indicators such as goods and services tax collections, fuel consumption, and Purchasing Managers’ Index data — all trending positively.
That said, global tariff-related disruptions are discomforting. As the market adjusts to this uncertain new normal, caution is advised. Exposure to largecap stocks is a safer bet. Equities are likely to face volatility, and the key question is how one can use this volatility to accrue shares in solid companies whose prices fall due to weak sentiment rather than any deterioration in their business prospects.
Which sectors and stocks, in your opinion, will retail and institutional investors focus on over the next year?
Domestic consumption stories that are insulated from global uncertainties should perform well. With the individual tax relief measures introduced in the Budget, consumer staples and fast-moving consumer goods stocks are expected to benefit from demand growth in the next year or so, with this momentum likely extending into 2026-27.
Financials look appealing from a top-down perspective, given the expected 6.5 per cent growth for the next two years and a strong credit growth backdrop in a thriving economy.
Interest rates are expected to decline in FY26. A lower rate trajectory will affect the net interest margins of banks, particularly those with a lower proportion of fixed-rate loans. Banks with a higher proportion of fixed-rate loans will be less impacted.
From a valuation standpoint, banks appear reasonably priced compared to their historical valuations. The top four private banks and the top two public sector banks should be part of a well-rounded portfolio. The private sector banks have undergone a long consolidation over the past few years and have borne the brunt of foreign portfolio investor/foreign institutional investor selling. The growth potential of these banks, as the Indian economy chugs along, makes the risk/reward profile favourable for owning these stocks.
Another sector driven by domestic factors and shielded from international developments is India’s healthcare and diagnostics industry. The increasing awareness among Indians about preventive healthcare bodes well for this sector, making it an area of growing investor interest.
How do you see FY26 playing out for the Indian broking sector?
It’s a fact that operational costs continue to rise each year, eroding margins, and this reality is unlikely to change for the industry. However, tailwinds seen over the past five years are expected to persist, with retail investors in India becoming more mature in terms of systematically allocating funds to equities.
The industry has seen numerous changes aimed at curbing speculation over the past year. Alongside these measures, the market also saw a correction driven by concerns about valuations and foreign investor withdrawals.
The year ahead starts with headwinds due to sentiment around global factors. It is likely to be a ‘market-share grab’ year for the broking industry vis-à-vis secular growth backed by tailwinds seen in earlier years.
2025-26: MARKET OUTLOOK & STRATEGY
Outlook: Positive for 2025-26
GDP growth: 6.5% estimate
Nifty earnings: 10% growth forecast
Valuation: Nifty at 20x, fair value
Strategy: Stock selection + capitalise on volatility
Domestic factors: Priced in
Trump reset: Impact to unfold
Geopolitical risk: Short-term, buying opportunity
