Expert view on Indian stock market: Mayur Patel, President and Fund Manager- Listed Equity, 360 ONE Asset, is positive about the Indian stock market for the long term, even as he points out that the current valuation is stretched. In an interview with Mint, Patel underscored that while near-term corrections can\u2019t be ruled out, India\u2019s fundamental story remains strong and is an ‘add-on dips’ story. Here are edited excerpts of the interview:<\/p>\n
Is it the Trump tariffs or Q earnings trends that are weighing on market sentiment?<\/p>\n
While Q1 earnings remain weak, the outlook is actually encouraging. Consumer<\/a> demand is poised to rebound after a prolonged slowdown.<\/p>\n Tax reliefs, interest rate cuts, and enhanced liquidity amid cooling inflation should help revive consumption.<\/p>\n Credit growth, currently subdued, is also expected to pick up with a lag. So, earnings trends are not the primary concern.<\/p>\n The bigger overhang is uncertainty around US tariffs. The announcements so far are aggressive \u2014 20\u201335 per cent tariffs on a range of countries are clearly negative for global<\/a> trade.<\/p>\n This raises risks of higher inflation and an economic slowdown in the US. It could also disrupt global trade, delay corporate investment decisions, and increase equity risk premiums.<\/p>\n For India, the direct long-term impact of US tariffs is limited \u2014 merchandise exports to the US are just 2 per cent of Indian GDP, with services adding another few percentage points.<\/p>\n However, in the short term, higher tariffs on Indian exports (if finalised) could dampen market sentiment.<\/p>\n Interestingly, India might actually benefit over the longer term from the \u201cChina+1\u201d strategy, especially if Indian tariffs remain lower than those on other competing economies.<\/p>\n Also Read | Sensex drops 500 points. Why did the market fall?<\/a>What is your short-term outlook for the Indian stock market amid the persisting headwinds?<\/p>\n We don\u2019t try to predict short-term market movements. That said, we are a bit cautious in the near term.<\/p>\n Valuations are above average, and there\u2019s a lot of global uncertainty in the mix, whether it\u2019s US tariffs or geopolitical tensions.<\/p>\n Also Read | Expert view: See Nifty at 26,300 by March 2026; overweight on BFSI, telecom<\/a>Does current market valuation carry the risk of a deeper correction of about 10% or more?<\/p>\n Trying to call near-term market movements is rarely productive. Markets are complex, and short-term movements often have more noise than signal.<\/p>\n That said, there\u2019s no denying valuations are stretched. The Sensex P\/B, which had corrected from 4.25 times in September\u201924 to 3.76 times in Q1, is back at 4.5 times \u2014 well above the long-term mean of 3.2 times.<\/p>\n So yes, some volatility or even a correction is certainly possible, especially with risks like US trade policy or oil<\/a> price shocks from the Middle East.<\/p>\n But if we step back, India\u2019s domestic macro picture is solid. Growth is improving, inflation is coming down, the RBI has front-loaded rate cuts and even announced CRR cuts \u2014 all pro-growth signals.<\/p>\n Discretionary consumption is also set to revive with the \u20b91 trillion tax relief and upcoming Pay Commission hikes.<\/p>\n So while near-term corrections can\u2019t be ruled out, India\u2019s fundamental story is strong.<\/p>\n Think of it like a high-quality, high-growth stock that looks pricey today but offers long-term value \u2014 it\u2019s really an \u201cadd-on-dips\u201d story.<\/p>\n What should be our equity portfolio at the current juncture?<\/p>\n We\u2019re clearly in a market where bottom-up stock selection matters far more than top-down positioning.<\/p>\n Market internals would matter more than market timing.<\/p>\n Key portfolio construction thoughts:<\/p>\n (i) Growth leadership is shifting from government-led capex to consumer<\/a> discretionary spending.<\/p>\n (ii) After a strong run, value as a factor may underperform, with quality and growth factors likely to come back in favour, helped by urban<\/a> consumption stimulus and a supportive rate\/liquidity backdrop.<\/p>\n (iii) Export-driven sectors are vulnerable to earnings downgrades amid global uncertainties.<\/p>\n (iv) Prefer domestic demand-driven stories over those heavily reliant on global macros.<\/p>\n Which sectors can outperform in the next one to two years? Can some of the recent underperformers see a revival?<\/p>\n Over the last five years, government capex grew from \u20b93.4 trillion to \u20b911 trillion \u2014 an impressive 27 per cent CAGR, which really helped capex-linked sectors and value stocks.<\/p>\n Looking ahead, we\u2019re seeing the government\u2019s focus<\/a> shift toward reviving consumption and encouraging private capex while controlling the fiscal deficit, with government capex growth likely to moderate.<\/p>\n This sets the stage for a potential comeback in the growth and quality segments of the market.<\/p>\n Coming to specific areas of preference with a slightly longer-term view, we do see robust growth prospects in the following sectors:<\/p>\n (i) Manufacturing: Renewables, electronics, semiconductors, etc<\/a>.<\/p>\n (ii) Consumer discretionary: Benefiting from fiscal incentives and potential pay commission-related hikes.<\/p>\n (iii) Power sector: Opportunities, especially in transmission and distribution.<\/p>\n (iv) Auto EV plays: Positioned for sustained growth driven by rising penetration of EVs.<\/p>\n (v) Quick commerce: Emerging space with significant growth potential.<\/p>\n (vi) Pharma CDMO: Leveraging India’s global competitive advantage.<\/p>\n (vii) Telecom: Sector attractiveness enhanced by industry consolidation.<\/p>\n (viii) High-quality NBFCs: Consistent growth leaders.<\/p>\n (ix) Private banks: Offering attractive valuations and stable growth.<\/p>\n Also Read | Expert view: Rahul Ghose of Hedged.in on key triggers for markets, stocks to buy<\/a>Will the second half of the financial year be better for the Indian stock market than the first half? Please explain your views.<\/p>\n At current valuation levels, it\u2019s important to keep short-term return expectations modest, and instead focus on systematic, long-term investing.<\/p>\n Historically, as investors stretch their horizon from one year to five years, volatility in returns \u2014 as measured by standard deviation\u2014reduces significantly, and the risk-reward ratio improves.<\/p>\n If we look past short-term volatility, we feel good about H2. Consumption should recover, credit growth is likely to pick up, and lower rates will support overall growth.<\/p>\n Also, with market ROEs of around 15%, each passing year naturally compresses P\/B multiples, improving the long-term risk-reward balance.<\/p>\n In short, the cyclical rebound in discretionary consumption and the steady rise of manufacturing are India’s two big growth drivers in the coming years.<\/p>\n So, have some appetite for short-term volatility and invest systematically in this structural growth story.<\/p>\n Read all market-related news here<\/a><\/p>\n