Market veteran and the founder of Kedianomics, Sushil Kedia, is bullish on the Indian stock market and the IT sector. On the other hand, he is bearish on gold and crude oil. In an exclusive podcast with Mint, Kedia claimed that the Nifty 50 could reach 32,000 by Q3 2027. “In the near term, markets appear to be bottoming out. The Nifty could move towards 27,000 in the short term. Over the longer term, the index could reach 32,000 by Q3 2027,” he said. Kedia is bullish on the IT sector and believes the sector can strongly outperform over the next one year.
Here are edited excerpts of the interview:
What is your assessment of the Indian stock market?
Historically, extreme fear is rare and often signals that markets may be near a bottom. When pessimism peaks, investors begin to ask: What’s worse that can happen from here?
This emotional extreme often creates contrarian opportunities, as prices may already reflect the worst-case scenario.
In the near term, markets appear to be bottoming out. The Nifty could move towards 27,000 in the short term. Over the longer term, the index could reach 32,000 by Q3 2027 (with some delay from earlier expectations).
Markets may remain volatile, but the broader trajectory remains constructive.
What is the outlook on crude oil and its impact?
The recent spike in crude oil is largely due to logistical disruptions, not structural demand. Events like geopolitical tensions in the Middle East create temporary supply shocks, leading to short-term price spikes.
However, such disruptions are not long-lasting, and crude prices are expected to soften over time. The current volatility is more of a sentiment-driven reaction than a sustained trend.
Why is there excessive pessimism around IT stocks?
The current narrative suggests that AI could disrupt Indian IT companies. However, this view may be overly exaggerated. AI still requires human supervision, skilled implementation, and continuous testing and refinement.
Rather than replacing IT professionals, AI will likely enhance productivity, requiring workers to re-skill and adapt. The idea that Indian IT companies will be left out of the global AI opportunity is unrealistic. Prices have corrected but not collapsed, indicating underlying strength.
Selling momentum is weakening. There are signs of contrarian buying. This suggests that IT stocks could be near a turning point. The IT sector is likely to outperform over the next year. It could deliver surprisingly strong returns as sentiment reverses.
Within the IT sector, which stocks could lead the rally?
We have studied this in depth, and the answer is quite straightforward: smaller, high-beta IT stocks are likely to outperform.
These stocks corrected more sharply during the downturn, so as sentiment reverses and price momentum returns, they are expected to rise faster than large-cap peers.
That said, large-cap IT companies like Infosys, Wipro, TCS, and HCL Tech are also well-positioned. Even a conservative estimate suggests they could see a 30% rebound, with the potential for higher upside if sentiment improves further.
If equities are expected to rise, is it time to trim exposure to gold? What is the outlook for gold?
The view is clearly bearish on gold. Gold and silver recently witnessed a climactic, parabolic rally, where short positions were squeezed sharply.
Such moves are rare and typically occur once every 20–30 years in commodity cycles. After these spikes, prices tend to correct and move sideways or decline.
The rally in gold was largely driven by de-dollarisation themes and geopolitical tensions. Countries explored reducing dependence on the US dollar, leading to increased demand for gold.
However, recent geopolitical developments suggest that the de-dollarisation narrative has weakened, reducing one of the key drivers behind gold’s rally.
A key signal is that even amid extreme geopolitical tensions and war-like conditions, gold has failed to rally meaningfully. When an asset does not respond positively to favourable triggers, it indicates underlying weakness. In market terms, when “good news stops being good news,” it is often a bearish sign.
What are your views on the dollar–rupee dynamics? The rupee is at record low levels—how do you see it going ahead?
Over the long run, stock markets tend to rise year after year—they essentially reflect inflation in asset prices.
At the same time, our currency has steadily depreciated.
Stock market returns are not evenly distributed over time. They are clustered—compressed into short bursts of high performance. Interestingly, there is a strong pattern: nearly 75% of market returns are generated during periods when the rupee is strengthening.
Our view is this: if the rupee–dollar rate starts moving below ₹92 in the futures market, it could trigger a move toward ₹82. Historically, there is roughly a 1.5x beta relationship—a 10% appreciation in the rupee can lead to around 16% gains in the Nifty under normal conditions. In oversold markets, the upside could be even higher.
Currently, the rupee–dollar chart suggests that the rupee may be poised for a recovery. This aligns with a broader pattern: when the rupee strengthens, initial buying typically flows into “safe” sectors.
FIIs have been selling Indian equities quite aggressively. What is driving them away from Indian markets?
When a country’s currency consistently erodes investor returns, it can be demoralising—no matter how well the underlying equities perform. Even if stock portfolios generate returns in local currency terms, a weakening currency can wipe out those gains in dollar terms.
This has been one of the key issues. In dollar terms, India hasn’t delivered meaningful returns for foreign investors over a period of time.
However, this trend may not persist. If the rupee stabilises or strengthens, and if competing opportunities—such as commodities or other overheated markets—cool off, the India story could be rediscovered.
In fact, we believe we are near the bottom of FII pessimism. Alternative global opportunities that attracted flows are gradually losing appeal. As that happens, FIIs are likely to return.
India is now among the largest equity markets globally in terms of market capitalisation. If performance picks up, global capital will inevitably follow.
Interestingly, despite aggressive FII selling, the Indian market has shown remarkable resilience. Domestic investors—both retail and institutional—have absorbed the selling pressure effectively.
This resilience is a strong bullish signal. When performance returns, it could trigger a significant inflow of global capital, potentially leading to a sharp rally.
Some argue that FIIs are moving away from India because there is no strong AI theme to invest in. Do you think FII returns will depend primarily on domestic macro factors?
I don’t fully subscribe to the view that FIIs have exited India simply because of the absence of an AI theme.
Capital may have moved to markets like Korea or into AI-driven stocks globally because those segments were delivering strong momentum. But that doesn’t mean India was entirely ignored due to a lack of an AI story.
No investor is mandated to invest only in AI. A well-balanced portfolio requires diversification—across sectors, themes, and geographies.
In my view, two key factors drove FII outflows:
Currency impact: The rupee’s depreciation hurt dollar returns.
Valuations: Indian markets became richly valued, especially before the 2024 elections.
Once India starts delivering performance again, capital will return. It’s not that FII inflows drive performance—rather, performance attracts FII inflows.
Also, it’s worth noting that Indian markets historically do not endure prolonged corrections. Typically, corrections don’t last beyond 18 months.
We may be approaching that inflexion point where pessimism is at its peak—often a precursor to recovery.
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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.
