Market’s failure to follow through after posting a new ATH early Jan and its subsequent sell-off is causing market experts some concern that we now have a double top formation on the charts (Sep 24 and Jan 26) which usually leads to a sharp correction.
Venugopal acknowledges these concerns and says a sharp dip can be triggered by any event – geopolitical, knee-jerk reaction to Budget or something else. But this coming dip – if it does materialize - in his view will present a great opportunity to buy meaningfully into the market as this may well mark a bottom of the 15 month long trading range that the market has been in.
Fundamentals are turning better, thanks to conducive fiscal and monetary policy measures aimed at stimulating demand. We are seeing early signs of demand pick up – he feels we will see demand momentum pick up materially in 2026.
The India-EU FTA is a landmark event which augurs wellfor a number of labour intensive sectors including textiles, leather, gems& jewellery etc. He believes the concerns on automobile sector from cheaperEuropean imports are perhaps overblown as there is a 5 year window and many ofthe big European brands anyway have assembly lines in India that import CKDkits.
FII selling remains a huge drag on markets with variousnarratives including lack of AI trades, high valuations, tepid growth beingcited for the persistent selling. With growth now beginning to come back, someof these concerns will recede.
Metal prices are on a tear and that worries him aboutinflation down the road. While he sees inflation creeping up back to 4% levelsin 2026, there are concerns looking beyond this year, if commodities maintaintheir rally.
2026 could well see growth factor outperforming value –but get ready for the baton to change hands to value beyond this year, ifinflation keeps inching up on the back of a commodities rally.
He sees financials, IT and discretionary consumptionoutperforming the market in 2026, along with select industrials.
From an investor’s perspective, he clearly understandsthe frustration of those who have persisted with “buy-the-dip” strategy throughthe last 15 months. His advice to them is not to lose hope and throw in thetowel in the coming dip – maintain your conviction in buy-the-dip and youshould get well rewarded in the coming couple of years as fundamentals haveturned the corner, sentiment will follow.