Expert view: Pankaj Pandey, the head of research at ICICI Securities, remains constructive on Indian equities from a medium to long-term perspective. Pandey highlighted that the Nifty 50 is currently trading at nearly 17 times price-to-earnings (P/E) on a two-year forward basis, which is below its long-term average of nearly 18.2 times, providing a favourable entry point for investors with a medium to long-term investment horizon. In an interview with Mint, Pandey also shared his views on the sectors he is positive about, and quarterly earnings of India Inc. Edited excerpts:
What is your medium-term outlook for the market, considering the reality that the second and third-order impact of elevated crude oil prices will not fade away soon?
Elevated crude oil prices are certainly a macro headwind for India, given that we import the bulk of our crude oil requirement, with the likely impact being a rise in inflation, margin compression for manufacturing companies, and constraints on further monetary easing.
We, however, expect this situation to be transitory in nature with minimal long-term impact.
We remain constructive on equities from a medium to long-term perspective.
In current times, markets tend to react swiftly to global developments, especially geopolitical events; hence, any tangible resolution to the ongoing conflict could trigger a sharp correction in crude oil prices.
This, in turn, would likely boost market sentiment and support equities.
Given the unpredictable nature of such developments, attempting to time the market may not be a prudent strategy.
From a valuation standpoint, the Nifty 50 appears increasingly attractive.
The index is currently trading at nearly 17 times price-to-earnings (P/E) on a two-year forward basis, which is below its long-term average of nearly 18.2 times.
This moderation in valuations provides a favourable entry point for investors with a medium to long-term investment horizon.
DIIs have saved the market from a crash. Due to poor returns over the last year, don’t you think retail money might be trapped, as investors would not want to book losses, which could create a cycle of low returns and low retail money flow into the market?
Indian retail investors are getting smarter and more mature as equity investors.
Retail investors now don’t get swayed away by the market volatility and use it to their advantage to accumulate at lower levels.
Retail investors have invested higher amounts when there is a fall in equity markets.
On the other hand, whenever there is a rally in equity markets, investors have become cautious and invested smaller amounts at higher levels.
So far, there has been no sign of any change in this mature behaviour. During the months of March and April 2026, when the market fell sharply, inflows into equity mutual funds were at an all-time high ( ₹38,000 crore versus an average of ₹26,000 crore) despite markets delivering sub-par returns since the last two years.
The SIP culture and benefits of long-term investing are now deeply engraved into retail investors’ mindsets.
At least over the next few quarters, risk to retail flows is a low probability scenario.
What can bring FPIs back to Indian markets? We do not have AI play, our rupee is weak, prospects of earnings are also weak. Should we say FPIs will remain net sellers for a long time?
Foreign Portfolio Investors (FPIs) have been net sellers of approximately $50 billion over the past 2.5 years, which is relatively modest when viewed against their total holdings of nearly ₹750 billion, amounting to less than 7% of aggregate ownership.
Hence, the current selling does not indicate a fundamental exit from Indian equities.
A key driver of global capital flows in recent months has been the strong AI-led investment narrative, which has attracted disproportionate allocations toward markets such as the US and select export-driven economies.
However, such thematic flows tend to be cyclical in nature. As the current AI-driven exuberance moderates—either due to cooling growth expectations or valuation constraints—global capital is likely to diversify back into broader emerging market opportunities, including India.
From a macro standpoint, policy actions and signalling by the government and RBI suggest that the risk of a sharp depreciation of the Indian rupee is limited.
A relatively stable currency environment reduces hedging concerns for global investors and enhances India’s attractiveness as an investment destination. Importantly, the India investment case is not dependent on a single theme such as AI.
Instead, it offers diversified growth opportunities across multiple sectors—including financials, manufacturing, infrastructure, consumption, and energy transition.
In fact, compared to markets like South Korea or Taiwan, which are more concentrated and export-driven, India provides a broader, domestically anchored growth profile.
Additionally, recent relative underperformance, coupled with more reasonable valuations and a relatively undervalued currency, enhances India’s attractiveness from a risk-reward perspective.
To conclude, the recent phase of FPI selling appears more cyclical than structural.
We expect FPI outflows to meaningfully recede over the next few months, supported by stabilisation in global macro conditions, moderation in AI-driven capital concentration, improved relative valuation appeal, and stability in currency dynamics.
Overall, India remains a core allocation market within emerging markets, with strong fundamentals and diversified growth drivers likely to attract global capital over the medium term.
Which sectors are you positive on for the next one to two years?
We categorise our sectoral preferences into four key thematic buckets, capturing both cyclical and structural opportunities in the current market environment:
1. Capex beneficiaries
(Capital goods, metals, defence)
(i) Continued government-led infrastructure push and early signs of a private capex cycle revival underpin growth visibility.
(ii) Strong order inflows, execution pipelines, and operating leverage support earnings momentum.
(iii) Defence remains a structural play driven by indigenisation, higher budgetary allocation, and export opportunities.
(iv) Metals offer tactical upside leveraged to global recovery and China-related supply dynamics.
Investment View: Earnings visibility remains strong with multi-year growth tailwinds; prefer market leaders with robust order books.
2. Energy transition
(Power)
(i) The sector stands at the cusp of a multi-year investment cycle, led by renewables, transmission, and energy transition initiatives.
(ii) Improving PLFs, tariff structures, and balance sheet strength add to sector attractiveness.
(iii) Policy support and energy security priorities continue to drive capacity addition and capex.
(iv) Investment View: Structural rerating story with improving ROE profile and long-term visibility.
3. Structural Domestic Beneficiaries
(BFSI, real estate)
BFSI: (i) Healthy double-digit credit growth, improving asset quality, and stable margins.
(ii) Well-capitalised balance sheets and operating efficiency gains.
Real estate: (i) Benefiting from premiumization, consolidation, and strong demand trends.
(ii) Lower leverage, better cash flows, and sustained launch pipelines.
Investment View: Core portfolio exposure driven by domestic growth, balance sheet strength, and improving profitability metrics.
4. Premiumisation play
(Auto, hotels, hospitals)
(i) Consumption trend continues to shift toward higher-end discretionary spending.
Auto: Mix improvement, SUV shift, and premium segment resilience.
Hotels: Strong RevPAR growth, demand-supply mismatch, and operating leverage.
Hospitals: Rising healthcare spending, better realisations, and expansion-led growth.
Investment view: Secular demand-driven growth with strong pricing power and margin expansion potential.
Bottom line
Our sectoral stance balances cyclical recovery (capex, metals) with structural growth themes (BFSI, real estate, power) and premium consumption trends (auto, hospitality, healthcare).
This diversified framework allows participation across investment, consumption, and energy transition cycles, ensuring resilience amid macro uncertainties.
What is your assessment of Q4 earnings so far? Can we say the Q1 and Q2 earnings could be weak because of the oil shock?
Large-caps in line with expectations, while mid and small-caps continue to outperform.
Q4FY26 performance was largely in line with street expectations, reflecting resilience despite a volatile macro backdrop.
Topline growth came in at nearly 12% YoY, while adjusted PAT growth stood at a relatively modest nearly 5% YoY.
Within the index, financials marginally outperformed, reporting nearly 7% YoY growth in adjusted PAT, compared to nearly 5% YoY growth for non-financials.
For non-financials:
Operating margins declined nearly 60 bps QoQ to nearly 18%.
This was driven by an increase in raw material costs (nearly 90 bps QoQ impact).
Broad-based strength beyond large caps
Broader markets continued to outperform meaningfully:
Midcaps: Nearly 28% YoY earnings growth.
Small caps: Nearly 24% YoY earnings growth.
All listed companies reported nearly 16% YoY PAT growth in Q4FY26.
Ex-Nifty 50, earnings growth was even stronger at nearly 26% YoY, highlighting the breadth of the earnings recovery.
Importantly, this marks the third consecutive quarter of double-digit earnings growth:
Q4FY26: Nearly 16% YoY (till date)
Earnings outlook
Near-term earnings (Q1–Q2 FY27) may moderate, primarily due to the lagged impact of elevated crude oil prices on margins and inflation.
However, on a full-year basis, the impact appears manageable. Our forward estimates for Nifty EPS in FY27E and FY28E indicate only a low single-digit downward adjustment (<=3%).
This suggests that crude-related pressures are likely transient rather than structural.
We continue to see no material risk to the double-digit earnings growth trajectory, with Nifty 50 earnings expected to grow nearly 13–15% CAGR over FY26–FY28E.
Overall, the earnings cycle remains healthy, with temporary margin pressures unlikely to derail the broader growth trajectory.
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Disclaimer: This story is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
