Overseas Institutional traders (FIIs) are anticipated to proceed promoting because the Indian fairness markets nonetheless seem considerably costly, in line with Kotak Institutional Equities.
Pratik Gupta, CEO and Co-head at Kotak Institutional Equities, mentioned that Nifty 50 stays considerably costly at a worth to earnings a number of of 19 occasions based mostly on March 2026 earnings estimates, which is considerably increased than historic averages.
“That is particularly excessive contemplating earnings CAGR of 14 per cent in FY26 and FY27, with draw back dangers to such estimates. Therefore, we don’t count on significant upside to the Nifty within the quick time period,” Gupta mentioned.
Nonetheless, most international traders stay optimistic about India’s medium-term (subsequent three-five years) progress outlook, he mentioned. They want to enhance their publicity to Indian shares, however are presently working right into a duopoly of excessive valuations, and a liquidity crunch as rising market (EM) funds face redemptions.
Cash flows into the US
“Cash is flowing again to the US, partly because of a powerful greenback and Trump’s insurance policies. Even when India was engaging, they don’t have cash to speculate as a result of capital is flowing again to the US,” Gupta mentioned.
Larger capital beneficial properties tax has additionally been biting the FIIs, Gupta mentioned, as they’ve little returns left with the rupee depreciating, bond yields rising, taxes, surcharges and fund supervisor charges. A weaker US greenback, enhance in authorities and personal capital expenditure and an finish to the continuing company earnings slowdown may carry again flows into EM funds, he mentioned.
Nonetheless, the hunch in earnings again dwelling is predicted to proceed within the March and June quarters as properly – with earnings progress for FY26 projected at 14.5 per cent. Regardless that the second half is seen higher, the brokerage home expects the market to stay vary certain until the top of the yr.
In comparison with large-cap shares, he’s extra cautious on the small- and mid-caps as valuations are nonetheless costly normally after current corrections.
Given the warning on these areas, home inflows from native mutual funds and others have additionally seen to have been directed away from small- and mid-cap or thematic funds, he mentioned. Home traders are more and more favouring large-cap or balanced debt-equity funds.
Amongst sectors, Kotak Institutional Equities prefers giant personal banks, non-banking monetary firms, life insurance coverage firms, lodges, actual property and the tourism trade. The dealer stays cautious on shopper staples, discretionary, oil and gasoline, and chemical substances sectors.
