The equity benchmarks hit their new 52-week highs on Thursday, amid a revival in foreign inflows and corporate earnings. On Thursday, both the Nifty 50 and Sensex, after touching their 52-week high of 26,246.65 and 85,801.70, respectively, pared some gains to close the day 0.5% higher. Both the indices were 0.2% away from all-time highs reached in September 2024.
“Talks of a US-India deal nearing conclusion have also acted as a catalyst for the market,” said Sandeep Raina, head of research at Nuvama Professional Clients Group. He added that broader index results exceeded expectations, providing comfort to investors, along with a reduction in FII selling in cash segments compared to the past two-three months. In October, FPIs became net buyers at Rs 11,146.34 crore after three months of negative flows. So far in November, FPIs are net buyers to the tune of Rs 3,348.43 crore.
What did Herald van der Linde say?
“After a recent underperformance, we think India’s valuations offer value versus Chinese equities,” said Herald van der Linde, head of equity strategy Asia Pacific at HSBC, in a research note on Thursday. India is currently the biggest underweight in global emerging market portfolios, he added. On a year-to-date basis, the MSCI India index is up only 7.77%, lagging the emerging markets index, which has risen 27.6%, driven by a surge in AI-related stocks.
“India’s equity markets are entering a promising phase of robust growth, supported by structural reforms, inclusive development, and a maturing financial ecosystem, said A Balasubramanian, MD & CEO of Aditya Birla Sun Life AMC. “Market trends indicate a broadening of participation, with the consolidation phase largely behind us and earnings growth ahead. We expect an 11–12% rise in broader indices, driven by volume expansion and a revival in capital expenditure,” he added. With reforms firing on all cylinders and capex momentum building, he believes India’s market outlook remains resilient and optimistic.
What’s driving this sense of optimism?
The optimism is led by an impressive corporate performance. Raina of Nuvama points out that Nifty50 EPS cuts for FY27 were marginal, while Q2FY26 results for the top 150 and bottom 250 companies showed 10% sales growth and 25% profit growth, improving market sentiment post the September quarter. “Earnings are set to recover; banks’ margins will expand in the coming quarters and consumer names, including autos, are set to benefit from GST reductions and lower interest rates,” adds Linde of HSBC.
Balasubramanian attributes the recent market rally to government reforms that are boosting consumption and corporate earnings. He highlighted that GST restructuring has increased volumes without hurting margins. “GST cuts drive volume, which translates into higher revenue and better earnings,” he said. Balasubramanian paints a bullish picture of the economy, citing aggressive private-sector investments by corporate groups such as Tata, Reliance, Birla, Adani, Mahindra, L&T, and others across defence, energy, and infrastructure. He noted a shift in capital markets, with companies increasingly preferring equity over debt. “Equity has a multiplier effect,” he said. “One rupee of equity can unlock two rupees of debt. Corporates have learned to expand using risk capital.”
Meanwhile, Thursday’s gains were driven by HDFC Bank, Reliance, and Bajaj Finance, while HCL Technologies and Infosys weighed the most.
Broader indices fall: The BSE Midcap and BSE Smallcap closed 0.1% and 0.2% lower, respectively. Among sectoral indices, BSE Energy, BSE Financial Services, and BSE Capital Goods rose the most, while IT, telecom, and consumer durable indices were the top losers.
While Balasubramanian is optimistic about the market, he also advises caution. He suggests that investors can confidently adopt a ‘buy and hold’ strategy, but they should temper their return expectations, as markets sometimes front-load gains, as seen over the past three years. He is bullish on sectors such as financials, cement, select auto stocks, and energy, particularly oil marketing companies.
He remains cautious on sectors with limited earnings visibility, such as textiles, chemicals, and commercial vehicles.
