Knowledgeable view: Pranab Uniyal, Head – HDFC Tru (Funding Advisory, HDFC Securities), believes the Nifty 50 could hit a file excessive by the tip of FY26 if tariff points are resolved and main sectors just like the IT and pharma should not focused by the US with protectionist measures. In an interview with Mint, Uniyal flagged the H-1B visa payment hike and the HIRE Act as key dangers the market mustn’t overlook. Listed here are edited excerpts of the interview:
How do you see the Indian inventory market’s efficiency within the first half of FY26?
Trump’s reversal of liberation day tariffs marked a backside, and Indian markets have rallied sharply from these lows.
Nevertheless, on a YTD (year-to-date) foundation or 12-month foundation, returns have been flat to unfavourable. India has additionally considerably underperformed rising markets throughout this era.
Weak income development, FII promoting and costly valuations had been the important thing causes. Markets would have carried out even worse, however massive, constant home inflows have cushioned the autumn.
Do you anticipate H2FY26 to be higher than H1? What are the important thing tailwinds?
Stronger earnings development, extra reasonable valuations, rate of interest cuts and GST cuts may grow to be tailwinds.
We imagine the earnings downgrade cycle has kind of bottomed out.
We anticipate earnings development to select up in sure massive sectors, similar to banking and client staples, over the subsequent six months.
GST cuts may assist auto and client durables earnings. Some affordable concepts may also be present in mid- and small-cap shares, however traders ought to depend on sturdy bottom-up analysis.
What are your base case and bull case targets for the Nifty 50 for FY26?
Our median estimate is for Nifty to succeed in a brand new excessive by the tip of FY26. This assumes that tariffs reasonable and that the US doesn’t goal massive sectors like IT and pharma with protectionist measures.
The bear case can be if the IT sector is hit with vital protectionist measures.
The precise ranges would depend upon the severity of such measures. The bull case may come if the tariffs/commerce wars are meaningfully decrease and the present reforms and financial and financial measures are improved even additional.
Do you see some dangers that traders mustn’t overlook?
The “Make America Nice Once more” (MAGA) constituency has been discussing motion in opposition to the outsourcing of jobs within the providers sector. Peter Navarro, Donald Trump’s commerce advisor, has additionally supported a name to “tariff” overseas distant staff.
The H-1B visa charges, the HIRE Act (which proposes a 25 per cent tax on outsourcing funds), or different such measures may meaningfully impression India’s IT sector and its future development.
Indian IT/ ITES sector exports had been round $200 billion in FY24 and about 7-8 per cent of GDP. US tariffs on the Indian IT/ITES sector would have a big impression on IT (13 per cent Nifty weight) and even drag down sectors like BFSI, actual property, autos and client durables.
That is the one largest danger to be cautious of. A binary occasion like this will solely be hedged when the small print and their impression grow to be clearer. For now, we focus our investments on different sectors.
When can we see a cloth revival in earnings? May it begin from Q2 solely?
The earnings restoration could also be gentle in Q2 however will probably get stronger in Q3, and This autumn ought to see a marked enchancment from present ranges. We, in addition to the road, are estimating 15-17 per cent earnings development for Nifty in FY27.
Which sectors do you anticipate to guide the subsequent rally of the markets?
Amid rising international commerce tensions, we’re strategically favouring domestic-oriented sectors which can be extra insulated from worldwide uncertainty.
Our focus is on sectors like massive banks, actual property, auto OEMs, cement, and client discretionary, that are instantly tied to India’s sturdy and rising inner demand.
We’ve got been underweight within the IT, oil and fuel and FMCG sectors for a while now.
FIIs have been relentlessly promoting Indian shares since July. What may carry them again to the Indian market?
Traditionally, overseas funding flows have been delicate to a mixture of international financial circumstances, home coverage, and market fundamentals.
FIIs had been heavy sellers in 2008 and in 2018 however grew to become internet patrons in 2009 and 2019 when valuations grew to become less expensive and financial fundamentals improved.
Over the previous 12 months, the MSCI rising markets index has outperformed the Nifty 50 by 23 per cent.
Because of this, India’s present valuation premium to rising markets has fallen from a excessive of almost 100 per cent in September 2024 to almost 65 per cent now, which is broadly consistent with the 10-year median of 60 per cent.
FIIs have funded their rising market trades to date with out outflows from India. With this relative India market correction, we anticipate FIIs to start out shopping for once more as and when the tariff dispute is resolved.
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Disclaimer: This story is for academic functions solely. The views and proposals expressed are these of the skilled, not Mint. We advise traders to seek the advice of with licensed specialists earlier than making any funding choices, as market circumstances can change quickly and circumstances could fluctuate.
