Expert view: Nifty 50 unlikely to reclaim 26,000 mark by year-end, says the head of Nuvama Professional Clients Group | Stock Market News

Expert view: Santosh Pandey, President and Head of Nuvama Professional Clients Group, believes the Indian stock market may see a Santa Claus rally, but it seems unlikely that the benchmark index Nifty 50 will reclaim the 26,000 mark by the end of the year. Talking to Mint, Pandey also shared his views on Reliance stock, mid and small-cap segments and sectors he is positive about.

Edited excerpts:

Do you think the Nifty 50 can reclaim the 26,000 mark by the year-end? Can we see a Santa Claus rally?

The Nifty 50 had been oversold around the 23,400 mark, which led to a short-covering rally following positive news, such as the BJP’s majority in the Maharashtra state elections. 

While this has provided some short-term momentum, we believe the market is more likely to consolidate in the near term. 

A decisive move in either direction will likely come around the Union Budget 2025 or after the Q3FY25 results, as these events could offer clearer guidance on earnings and macroeconomic conditions. 

Given the current market environment and earnings uncertainty, it seems unlikely that the Nifty will reclaim the 26,000 level by year-end. 

While a ‘Santa Claus rally’ is always possible, we remain cautious about expecting a sharp rally in the short term until there is more clarity on key factors like foreign institutional flows and earnings growth.

FPIs usually sell before the year-end holiday season. Will this trend continue even after their intense selloff since September last week?

In the past few days, FIIs (foreign institutional investors) have turned net buyers after the highest absolute dollar-selling YTD (year-to-date), surpassing even the levels seen during the COVID-19 lows and the Global Financial Crisis. 

This indicates that FII selling pressure may have largely stabilised. While FIIs typically reduce exposure before the year-end holiday season, the current market dynamics suggest that we may not see the same intensity of selling as we did in the past. 

Given the recent shift towards buying, it’s possible that the worst of the selling is behind us, and we could see a more balanced approach from FIIs in the coming weeks.

What are your views on the PSU stocks? Do you see any value in them at this juncture?

Yes, after the recent sharp correction, certain PSU stocks in the defence and banking sectors have become attractive at this juncture.

The valuations have become more compelling, especially for stocks poised to benefit from ongoing government initiatives and sector-specific tailwinds.

While there may be some short-term volatility, the long-term outlook for these sectors remains positive, making them worth considering for value-focused investors.

What is your view on Reliance shares? Should we buy, sell or hold?

Reliance shares have faced pressure over the past three months, primarily due to disappointing performance in the retail and O2C (oil-to-chemicals) segments over the last 12-18 months. 

Additionally, the new energy initiatives will take time to contribute meaningfully to the company’s SOTP valuation. 

Given these factors, we are currently in a ‘wait and watch’ mode about Reliance as we await more clarity on how these segments evolve and contribute to the overall growth story.

Would you bet on mid-and small-cap segments now or wait for more corrections?

We actively examine the small and mid-cap segments because our clientele/investors are interested in many undiscovered jewels and stories.

The small- and mid-cap segments have already seen a reasonable correction, and we believe several attractive opportunities exist within this space.

While caution is always warranted due to market volatility, we find multiple good investment prospects in small- and mid-cap stocks, particularly those with strong fundamentals and growth potential.

Therefore, we are comfortable selectively adding exposure to this segment rather than waiting for further correction.

Which sectors would you recommend buying for the next one to two years?

For the next one to two years, we recommend looking at the following sectors:

IT: The BFSI discretionary spending recovery is expected to drive growth in this sector.

Hospitals: The healthcare sector, particularly hospitals, stands to benefit from the ongoing expansion and doubling of capacity, which should support both top-line growth and improved profitability.

Textiles: The sector could see a positive impact due to supply chain disruptions in Bangladesh, making India an attractive alternative for global textile demand.

EMS (electronics manufacturing services): There is high potential due to the large market opportunity, primarily due to the ‘Make in India’ initiative, guarded against Chinese imports and security concerns.

This makes the EMS sector very attractive for long-term growth. While valuations are higher, the industry does provide best-in-class earning growth.

Power: Post-2000-2008, excess power capacity addition has remained stagnant while demand has grown exponentially.

Hence, we are positive on solar and power ancillaries like transformers, cables, and EPC companies, which will be able to bridge the gap and thus have the potential to deliver value growth.

These sectors show strong growth potential, supported by structural trends and sector-specific tailwinds.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.