The benchmark indices have fallen around 8% from their lifetime high levels hit in late September due to slowing earnings growth and consistent selling by foreign investors. Rahul Singh, CIO – equities at Tata AMC, tells Vivek Kumar M that the markets can enter an extended period of consolidation. Donald Trump’s victory in the US presidential election is neutral to slightly positive for India, he added. Excerpts:
What does Trump’s victory in the US presidential elections mean for Indian markets?
If the US economy recovers, there are two implications. Firstly, it will be positive news for some of our sectors. But at the same time, emerging market funds will not receive inflows because the dollar will get stronger. These two things might balance each other out. The third thing is what kind of tariffs Trump levies — whether he is more anti-China and pro-India. Overall, it is neutral to slightly positive.
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We have seen a slowdown in the domestic economy and corporate earnings growth momentum. What do you think is the way ahead?
Urban consumption has slowed down. Rural consumption has been slow for the last one-and-a-half to two years. Despite some signs of recovery, any clear picture has not emerged yet. Apart from this, many banks and NBFCs have slowed down their growth either because of their own problems or owing to RBI’s restrictions. If the credit growth slows down, it also slows down consumption. This also means that some immediate revival is unlikely.
How much of a risk does the slowing earnings growth pose for markets?
Earnings will be the most important factor for markets from here on because we are at high valuation. At these valuations, the growth has to come. If the earnings growth does not pick up and if the slowdown extends to FY26, there could be a slightly longer period of consolidation.
The Nifty EPS growth estimate has already come down to 6-7%. When we started the year, it was 12%. Next year’s estimates remain unchanged at 15-16% at this point in time. The market trend will be decided based on whether they are sustainable or not over the next four-five months. Till March, it will be wait and watch.
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