Speaking to ET Now, Vijayakumar said investors should not wait on the sidelines for a big correction because the next earnings upcycle could already be taking shape — especially after key policy reforms and monetary easing by the Reserve Bank of India (RBI).
“We were cautious at the start of the year, but after the Union Budget, GST rationalisation, and a 100 basis point rate cut by the MPC, we have turned bullish. India is set to outperform global markets,” he said.
India’s underperformance may be nearing an end
Vijayakumar highlighted that while Indian equities have underperformed their global peers so far in 2025, the situation is likely to reverse soon.
“Year-to-date, the Nifty is up just 5.6%, while the MSCI World Index has gained 17% and MSCI Emerging Markets Index is up 27%. This underperformance is temporary and largely due to muted earnings growth last year,” he said.
Between 2020 and 2024, India’s corporate earnings grew at a compound annual rate of 24%, but FY25 earnings slowed sharply to around 5%, inflating valuations to over 22x earnings.“You cannot justify a 22 PE market with 5% earnings growth. But now the setup is improving. FY26 earnings should grow 8–10%, and by FY27 we could see 15% or higher growth. The market will start discounting that now,” he added.
FII selling slowing, DII buying strong
A key positive trend, according to Vijayakumar, is the sharp decline in foreign institutional investor (FII) selling in recent days, which is being fully absorbed by strong domestic inflows.
“Yesterday, FII selling was minimal while DII buying completely eclipsed it. Valuation differentials between India and other emerging markets have also narrowed. Therefore, I will not be surprised if FIIs turn buyers in the next few weeks,” he said.
Banks and consumption sectors lead the opportunity
Despite the market trading at roughly 21x forward earnings, slightly above its 10-year average of 18.5x, Vijayakumar sees attractive pockets of value.
“Large private sector banks and PSU banks are trading below their long-term averages because FIIs have sold them heavily — over $23 billion this year. When FIIs return, they’ll buy the same stocks they’ve been selling. That’s where the opportunity lies,” he explained.
He also remains optimistic on consumption-led sectors, including automobiles, consumer durables, and white goods.
“Demand in automobiles is the strongest in 20–25 years. The concern now is logistics — not sales. With lower interest rates, this demand buoyancy will likely sustain over the medium term,” he added.
IPO boom continues despite flat market
India’s primary market continues to see strong momentum even as the secondary market consolidates. Vijayakumar attributed this to attractive IPO pricing and strong institutional participation.
“Normally, IPOs boom when markets do well, but this time the IPO market is booming even though the Nifty’s one-year return is negative. Institutional investors are subscribing because many IPOs are coming at fair or even attractive valuations compared to richly valued listed peers,” he explained.
Retail investors, too, are participating enthusiastically due to strong listing gains.
“We are positive on LG Electronics’ IPO — it’s a steady performer with good market share. Tata Capital’s IPO may offer limited listing gains due to size, but for long-term investors, it’s a strong buy given the Tata pedigree,” he added.
Market strategy: Buy on dips, stay invested
With earnings visibility improving and liquidity remaining strong, Vijayakumar believes the current phase offers investors an opportunity to accumulate quality stocks rather than wait for deep corrections.
“Buy on dips — or even at current levels. The dips may not come. Earnings recovery, rate cuts, and policy reforms will drive a strong uptrend in FY26 and beyond,” he said.
He expects the Nifty’s earnings growth to accelerate from 8–10% in FY26 to 15% or more in FY27, setting up a multi-year bull market supported by domestic inflows and stronger global positioning for India.
Bottom Line
Market View: Bullish post-GST and RBI rate cut
Key Themes: Banking, PSU, consumption, autos, durables
FII Trend: Selling slowing, potential reversal soon
IPO Outlook: Attractive valuations, strong retail demand
Strategy: Buy on dips, stay invested for FY26–FY27 earnings cycle
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