Expert view: Sneha Poddar, VP of research at wealth management, Motilal Oswal Financial Services, expects the Nifty 50 to end the year with healthy gains. She believes GST reforms, India’s sovereign rating upgrade after 18 years, RBI’s liquidity support, and government stimulus should aid earnings growth. In an interview with Mint, Poddar shared her views on the Indian stock market, current valuations, sectors she is positive about, and strategy for the mid and small-caps. Here are edited excerpts of the interview:
Nifty has seen a modest gain of 6% year-to-date. Where do you see the index by the end of 2025?
The Indian stock market has been volatile and subdued this year, weighed down by weak earnings and global headwinds, including geopolitical concerns.
That said, we believe the impact of US tariffs on India will be fairly limited. Looking ahead, the setup for the rest of the year is constructive.
Factors like GST 2.0 rollout, India’s sovereign rating upgrade after 18 years, RBI’s liquidity support, and government stimulus should aid earnings growth.
A normal monsoon, rising rural income, and festive demand add further tailwinds. So, while the Nifty 50 has only gained about 6% so far this year, we expect the index to carry a positive bias and end 2025 on a better note.
How do you see the current valuation of the market? Do you find it sustainable?
Market valuations look quite reasonable right now. Nifty is trading at about 21 times forward earnings, which is broadly in line with its long-term average.
What’s more encouraging is the shift we have seen this quarter—from muted single-digit earnings growth last year to a more steady double-digit trajectory, with broader sector participation.
With FY26 earnings expected to grow around 10%, backed by GST reforms, rate cuts, and festive-led demand, valuations appear sustainable.
Of course, global uncertainties may limit near-term upside, but the combination of reasonable valuations and improving earnings momentum suggests the market can still deliver healthy returns into year-end.
What is the reason behind the underperformance of banking stocks? Is it the right time to buy them?
Banking stocks have been weak lately, mainly because of slower credit growth, margin pressure, and soft loan demand over the last few quarters.
Rising stress in unsecured loans and MSMEs has also added to concerns, while high slippages hurt profitability.
That said, things should start improving from the second half of FY26 with both consumption and industrial demand bouncing back. Margins are likely to recover as deposit costs ease, CRR cuts kick in, and credit costs normalise.
Asset quality in retail and MFI is also showing early signs of stability. Banks with strong deposit franchises look like good accumulation bets.
What sectors are under your investment radar for the next one to two years?
On the sectoral front, we are positive on domestic themes given the economy-wide benefits due to the announcement of GST 2.0 and hence like auto, consumer names, cement, hotels, insurance, and retail.
We are also positive on EMS (electronics manufacturing services), industrials, and capital market plays. EMS is benefiting from the government’s “Make in India” push and rising digital penetration.
Industrials are set to do well as both public and private capex pick up, supported by rate cuts and policy tailwinds. In capital markets, rising retail participation and steady SIP flows should help intermediaries and AMCs, though tighter F&O regulations are a risk.
So, our strategy is to remain overweight in these sectors and focus on leaders with scale, execution strength, and earnings visibility.
What should be our approach for the IT sector? Do you see value emerging in them?
The IT sector has been going through a rough patch, with revenues not moving much and margins hit by wage hikes.
Clients are still signing deals, but their decision-making is slower because of global uncertainty and their focus on cost control.
In the near term, growth will likely be gradual, driven more by vendor consolidation and some GenAI-related projects than by a broad recovery.
A big, sector-wide turnaround probably won’t happen before FY27. That said, valuations have cooled off to more reasonable levels.
For a strong re-rating, we’ll need to see clearer signs of a new tech investment cycle, discretionary spending coming back, and GenAI showing meaningful monetisation.
So, for now, it’s more about picking the right companies within IT rather than expecting the entire sector to bounce back quickly.
We think mid-single-digit growth in FY26 with some margin recovery in the second half looks realistic.
What should be our strategy for mid and small-cap segments? What are the pockets of opportunity?
Mid-caps delivered the healthy earnings growth of 24% YoY in Q1FY26 and are estimated to post 21% year-on-year (YoY) growth in FY26E.
The earnings revision cycle has also been favourable, with FY26E estimates upgraded marginally, and valuations being reasonable in many pockets.
Small-caps, however, continue to present a more mixed picture. They reported an 11% YoY earnings decline in Q1FY26 and faced a 4% cut in FY26E estimates.
Despite this, we expect earnings to bounce back in the second half and deliver 30%+ earnings growth in FY26E.
This sharp recovery potential is offset by valuation concerns, making the segment less attractive on a broad-based basis.
Midcap and small-cap stocks are currently trading at a premium to their long-term average P/E multiples.
Therefore, it is important to be selective and focus on companies that offer strong growth potential while maintaining reasonable valuations.
A staggered allocation strategy is advisable to mitigate near-term volatility.
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Disclaimer: This story is for educational purposes only. 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.
