Markets unlikely to correct significantly from here; BFSI, commodities may lead next rally: Sandeep Raina of Nuvama | Stock Market News

Expert view on markets: Sandeep Raina, Executive Vice President – WM Research at Nuvama Professional Clients Group, believes the worst may be behind us, and the Indian stock market is unlikely to correct significantly from here. In an interview with Mint, Raina said mega-cap BFSI (banking, financial services, and insurance) and commodities have the potential to lead the next market rally. Here are edited excerpts of the interview:

Is the worst behind? Do you expect a significant recovery in the Indian stock market?

From a valuation standpoint, it seems the worst may be behind us, and the market is unlikely to correct significantly from here.

Technically, the market has already surpassed the key hurdle of 22,800 on a weekly basis after a sharp dip below 22,000 in the first week of March.

However, predicting a significant recovery—surpassing previous highs—is challenging.

Factors such as GDP growth, corporate profit performance, and uncertainties regarding the impact of US tariffs on Indian exporters and commodity companies, which are crucial for Nifty 50 earnings growth, make it difficult to expect a strong rally.

What are the key triggers that will shape the Indian market in the next financial year?

Since the start of 2025, India has faced challenges with slow consumption growth and tight liquidity.

The Union Budget 2025 has provided relief by offering tax cuts, resulting in higher disposable income for the public. Additionally, the RBI’s liquidity injection and interest rate cuts have helped address liquidity concerns.

Going forward, earnings growth will be the primary trigger for the Indian market. If foreign institutional investors (FII) selling subsides, it could further boost the earnings cycle and provide a bullish outlook for the market.

Can we see the Nifty 50 above 27,000 in FY26?

It’s possible if earnings growth returns to double digits. However, without this, we anticipate a year of consolidation, similar to market behaviour in 2015-2016 and 2018-2019, where the market was stock-specific.

What is your outlook for the IT sector?

Following the post-COVID-19 digitisation boom, the growth of the IT sector has slowed. FY25 served as a weak base, but growth should pick up, especially within BFSI (Banking, Financial Services, and Insurance).

That being said, recent weak U.S. GDP figures and elevated valuations of certain mid-cap IT stocks (relative to their growth prospects) have made identifying clear outperformers in the sector more challenging. As a result, we are adopting a wait-and-watch approach regarding the IT sector.

Which sectors do you see offering value at the current juncture?

We believe the next rally will be driven by high-quality stocks with reasonable growth, rather than the value-driven rally of 2020-2024. Sectors with potential include:

Chemicals: While not currently in a value zone (many stocks are trading at a +30x 12-month P/E ratio), the sector is cyclical and at a low point.

Consumer-focused NBFCs: These stocks trade at around 4x 12-month P/B and are poised to benefit from the 2025 budget’s focus on consumers.

Automobiles (PV): Expect growth driven by the 2025 budget’s consumer boost.

Power ancillaries: Stocks here trade at a 20x 12-month P/E ratio.

Industrial consumables (mainly MNCs): This sector stands to benefit from the second leg of a strong Capex super cycle.

Which sectors could lead the next leg of a rally in the market?

Mega-cap BFSI (banking, financial services, and insurance) and commodities have the potential to lead the next market rally, driven by their massive underperformance over the past three to four years and the resolution of company-specific issues.

What could be an ideal portfolio for times of uncertainty?

An ideal portfolio in these uncertain times should include a mix of mega-cap BFSI stocks and cyclical low stories, such as chemicals, automobiles, power, and industrial consumables.

What should be our investment strategy to navigate market volatility?

We recommend staggered equity investments in 2025, focusing on stocks that have underperformed the market over the past three to four years. History suggests that the market leaders from previous bull runs often fail to perform in the subsequent rally. For example:

2009-2014: Infrastructure was a major underperformer.

2014-2019: Pharma stocks underperformed.

2020-2024: “Buy at any price” stocks lagged behind.

By focusing on these underperforming stocks, we believe investors can position themselves for the next market upswing.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.