Supportive monetary and fiscal policies, potential of good monsoons, pick up in domestic economic activity and global trade war induced recessionary fears receding are all coming together to give us a good set up for markets to take out their ATH made last year.
It is possible that once we have a new all time high, valuations may once again start looking expensive – unless we see earnings upgrades. But for now, a rally to new ATH seems on the cards.
Those inclined to take tactical calls as an overlay over their strategic asset allocation can consider a tactical overweight in equity now. Those who are underweight should seriously consider getting to neutral at least.
While India’s new doctrine established with Operation Sindoor – of treating any act of terror from Pakistan and its proxies as an act of war – does make our region a zone of heightened geopolitical conflict, Taher does not see this deterring FDI and FII flows into India over the short and medium terms.
While earnings growth expectations for FY25-26 are a modest 10-11%, Taher takes comfort in the fact that earnings downgrades have stopped and an upgrade cycle is perhaps a quarter or two away. Markets look at delta and not absolutes – and earnings delta will likely look good in the coming quarters.
Invesco India has maintained its pro-cyclical stance –which did take a bit of a beating in the correction – but is now bouncing back very well in the new rally that has commenced.