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Strong corporate earnings, lower crude oil prices and rising foreign institutional investor (FII) inflows are expected to support Indian equity markets in the coming months, with the market outlook remaining positive ahead of the festive trading season, said Shrikant Chouhan, Head of Equity Research at Kotak Neo.
Speaking to ANI on Friday, Chouhan said the Indian market is on a "very very strong" foundation, backed by improving corporate earnings and expectations of sustained profit growth over the next two years. He said the second-quarter FY27 earnings performance has been significantly better than the previous three quarters, strengthening the outlook for Indian equities. "With a year-on-year net profit growth of around 19 per cent and an expected CAGR growth of 1516 per cent for the next two years, foreign institutional investors have started looking at our markets," Chouhan said. He added that declining crude oil prices and upcoming index rebalancing are also supporting foreign investment flows. FII inflows have touched nearly USD 4 billion in recent days, including USD 1.5 billion in a single trading session. On global market trends, Chouhan said a possible slowdown in artificial intelligence (AI) spending and profit booking in global technology stocks could encourage investors to redirect capital towards emerging markets such as India. "Right now, they are seeing that because of Democrats, there may be some slowdown in AI spending, which can generate some more profit taking or liquidation of long positions in AI stocks... So that money is now going into fixed income and also to some markets where the AI dominance is a little less," he said. On the domestic IT sector, Chouhan said large-cap IT companies could face near-term growth challenges as they adjust their investments and strategies around AI. However, he sees better opportunities among smaller companies in the sector. "Mid-size companies and small-size companies from the IT sector can do really well in this particular market," he said. Chouhan advised investors to maintain exposure to large-cap stocks, which offer relatively attractive valuations and stability. He said large-cap companies are generally among the first to attract buying interest when markets recover. He added that while large-cap stocks can provide stability to portfolios, investors should remain selective when investing in mid-cap and small-cap stocks. Looking ahead to Sunday's special Muhurat trading session marking the beginning of Samvat 2083, Chouhan said the broader market outlook remains positive, supported by earnings growth, valuations and the possibility of further moderation in crude oil prices. He said some near-term consolidation cannot be ruled out, but the overall market trend is expected to remain upward. "Broadly, I am of the view that yes, we may see some consolidation, but eventually we are expecting the market to move higher," Chouhan said. (ANI)
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