Expert view: Nifty fairly priced, may correct 8–10% in short term, says Anirudh Garg of Invasset PMS | Stock Market News

Expert view: Anirudh Garg, Partner and Fund Manager at Invasset PMS, believes the Nifty 50 could potentially dip below the 22,000 level in 2025 before resuming its upward trajectory. In an interview with Mint, he said while he is bullish on the index over the next two years, it is fairly priced with a temporary downward bias of approximately 8–10 per cent.

Edited excerpts:

Did the Indian stock market meet your expectations in 2024?

The market’s performance in 2024 can be described as decent, with the Nifty 50 delivering a year-to-date return of approximately 9 per cent.

However, it fell short of my expectations. Several factors contributed to this underperformance.

First, the market entered the year trading at higher multiples, which created elevated expectations.

Second, the government, which is highly rated for its capex initiatives and management, did not meet those expectations after the election.

Lastly, the earnings season proved to be disappointing. We had projected the Nifty to touch 28,000 in a best-case scenario and 26,300 in the worst-case scenario.

Ultimately, the Nifty landed closer to the lower end of our expectations, achieving only the worst-case target.

This positions the performance as more restrained rather than robust.

What 2025 could have in store for us? Do you expect it to be better than 2024?

I believe 2025 will mirror 2024 in several ways. It is likely to be a year marked by volatility, with the Nifty potentially dipping below the 22,000 level before resuming its upward trajectory.

Overall, we anticipate the market’s performance to align closely with 2024, delivering a comparable upside.

That said, I expect 2026 to be a much stronger year for the Nifty, as it will provide sufficient time for growth to gain momentum and establish a lower base for the markets to build upon.

While we remain bullish on the Nifty over the next two years, we view the index as fairly priced with a temporary downward bias of approximately 8–10 per cent.

What sectors can create alpha next year?

After a period of correction, we expect CAPEX-oriented sectors to regain momentum in 2025, supported by both time and price consolidation.

Key sectors such as railways, defence, infrastructure, and power are poised for sustained growth and will likely create significant alpha.

In addition, platform-oriented businesses leveraging technology for consumer engagement should perform well.

The growing interest in stock market investments among Indian retail investors also positions companies in mutual funds, brokerage, and exchanges for strong growth.

We also see potential in select companies with monopoly-like advantages in niche consumer trends and preferences.

However, the outlook for global growth remains uncertain, and if it recovers, metals could join the rally later in the year.

On the other hand, we remain cautious about auto companies and brands trading at excessive valuations without commensurate growth.

While traditional FMCG companies are reasonably priced, we do not expect them to lead the next growth phase.

Should retail investors continue chasing momentum or emphasise value next year?

Retail investors should avoid chasing momentum in expensive markets, as this strategy could backfire when valuations are stretched.

Instead, I would advise investors to book profits in overvalued markets and patiently wait for corrections to reinvest in high-quality companies currently in momentum—those they believe hold long-term potential.

Doing thorough research and remaining on the sidelines during overheated market phases is essential, as corrections often provide better investment opportunities.

For those investing through SIPs, I recommend continuing them without interruption.

In fact, consider doubling your SIP contributions during market corrections to take advantage of the dip.

We believe we are in a structural bull market, and any corrections will likely be bull-market corrections rather than the onset of a bear market, which appears to have a very low probability at this stage.

What should be our strategy for the mid and small-cap segments next year?

Instead of focusing solely on strategies for mid and small-cap segments in the coming year, investors should prioritize identifying growth areas and companies with clear earnings visibility over the next two to three years. 

Look for businesses where the price-to-earnings-to-growth (PEG) ratio justifies the valuations. Do not avoid companies with high P/E ratios if they exhibit robust and sustainable growth. 

At INVasset, we emphasise the importance of avoiding biases. It’s a misconception that wealth creation is confined to mid and small-cap companies. 

Investors should adopt a broader perspective, focusing on businesses with strong models, reliable earnings potential, competent management, and a distinct competitive advantage—one that has evolved over time and sets the company apart today.

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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.