According to him, while the exceptional 25% returns of recent years may not repeat, India remains firmly in a structural bull run backed by strong domestic flows, robust corporate fundamentals, and policy tailwinds.
Ambani believes investors should now prepare for more sustainable returns in the range of 12–14%, as the market transitions from exuberance to stability.
He also shares his outlook on FIIs, earnings revival, sectoral opportunities, and why growth investing remains his preferred theme for FY26–27. Edited Excerpts –
Q) Thanks for taking the time out. Western headwinds seem to have slowed equity markets. How are you interpreting the current situation?
A) Western headwinds aren’t going away anytime soon, but markets have an uncanny ability to adjust to new realities over time. Indian valuations may look optically high compared to peers, but that’s been India’s constant reality. Investors are willing to pay a premium for our superior ROE profile and earnings resilience. That said, we should moderate expectations. The exceptional 25% returns seen in three out of the last four years may not be repeated in next 12 months. Investors should instead prepare for a more sustainable 12-14% return.
Q) The silver lining for D-Street could be that we might close September on a positive note after falling for the past two months. What are your expectations for the festive October month?
A) Trying to predict the market’s direction month-on-month is a futile exercise, but I do believe the worst is behind us. Over the past year, we’ve already seen a healthy time-wise correction of nearly 12 months, coupled with a 15% price correction on the Nifty, at the lows.
That’s a solid reset, and history shows Indian markets rarely stay down for longer – most corrections recover within 12-14 months.
With that context, September closing on a positive note is less of a silver lining and more of a natural transition point. The broader trend remains intact – we are still firmly in a structural bull run. So while October coinciding with the festive season may add to market sentiment, the bigger picture is that Indian equities are consolidating for the next leg higher.
Q) FIIs seem to be selling in a hurry. It looks like there are two strong trends on D-Street – fear from FIIs and FOMO from DIIs. Meanwhile, money has been flowing more into primary markets than secondary markets. Do you see this as a concern, or just part of the market cycle?
A) FII selling is not new; it’s simply part of the market cycle. In my opinion, the best of FII flows into India are still ahead of us. If you look back, we haven’t seen anything close to the kind of allocations that India received in FY04-08 when flows relative to market size were far higher.For now, foreign investors have tactically shifted allocations to markets like China, partly on valuation comfort, but India remains their structural bet. Once the rupee stabilizes, FIIs will resume flows, because India’s long-term story remains unmatched.
As for the surge of IPOs, I see it as a positive, not a concern. If the environment were genuinely risk-off, new issues would have been shelved. Instead, the strong response shows there’s real appetite for equity. For DIIs, IPOs are an efficient way to deploy large pools of liquidity and gain exposure to new sectors.
In fact, robust primary market activity also keeps secondary market valuations in check. Otherwise, excess liquidity chasing the same set of listed stocks would only push valuations to unsustainable levels.
Q) The H-1B visa may not have a large impact on IT companies’ balance sheets, but it could be a significant sentiment hit. What are your views, and how will this affect the future environment for IT companies?
A) Our conversations with managements suggest that Indian IT services companies have enough H-1B visa headroom to comfortably navigate FY26. With most firms securing 70-80% allocations, their overall dependence on H-1B visas has reduced by about 5%.
That means the margin drag from hiring more local talent in the US and higher visa costs, estimated at 10-30 basis points, will likely be deferred until 2027.
The Indian IT industry may focus increasingly on partnering with clients to form global capacity centres in India. The H-1B debate may make headlines, but it’s increasingly less relevant to the long-term growth trajectory of Indian IT.
A more material risk lies in potential policy moves around an outsourcing tax, floated by some US senators. If implemented, that could have deeper structural implications than visa caps.
Q) How do you see the rate cycle playing out in the upcoming policy meeting?
A) We expect the RBI to deliver a calibrated 25 basis point rate cut during the remainder of FY26. This will add to the cumulative 100 basis points easing undertaken in CY2025, while still keeping real interest rates comfortably positive in the range of 1.0-1.25% over the next 12 months.
Importantly, the Central bank is also expected to initiate open market operations to facilitate effective transmission in the bond markets, once the phased CRR cuts are completed. This becomes critical in light of the recent hardening of 10-year benchmark yields despite successive rate cuts.
If growth disappoints in H2 despite the monetary and fiscal measures, two rate cuts cannot be ruled out.
Q) Earnings have been lacklustre over the past few quarters. The government has done its part with the GST bonanza. When do you expect the benefits to start reflecting on company balance sheets?
A) After four quarters of muted earnings growth starting Q2 FY25, and with Q2 FY26 also likely to disappoint, we expect a recovery in H2 FY26, supported by substitution effects from policy measures. Consensus currently projects flat Nifty 50 earnings for FY26, but we anticipate a potential positive surprise.
For FY27, we expect a 15% earnings growth, given the low base and an expected turnaround in the consumption cycle. Fiscal measures such as income tax and GST cuts, combined with RBI rate reductions, should drive consumption, especially in discretionary segments.
Lower indirect taxes will improve affordability and release disposable income. For low- and middle-income households, savings on essentials (food staples, personal care, utilities) will free up purchasing power for higher-value discretionary categories like consumer durables, two-wheelers, entry-level cars, apparel, electronics, and leisure activities like retail, dining, and entertainment.
That said, a sustained recovery in consumption will also require wage growth and job creation to meaningfully lift household incomes. We expect the end of the “K-shaped” consumption pattern seen since Covid, with both rural and urban demand strengthening, supported by a good monsoon, easing inflation, and tax cuts.
These conditions also create a more conducive environment for private capex, which has remained subdued. Together with steady government support, this should provide a strong push to aggregate demand.
Private final consumption expenditure, which grew 6.7% in FY23-25, is now back in line with its pre-pandemic average of 6.8% (FY10-19), excluding the Covid-distorted years. Rural demand recovery has narrowed the rural-urban gap, while urban consumption continues to improve.
With inflation easing and GST rationalisation aiding purchasing power, rising consumption is expected to trigger a virtuous cycle, higher demand lifting capacity utilisation, hopefully encouraging private capex. We therefore see FY27 earnings growth at 15%, with a similar trajectory in FY28.
Q) Which theme do you think will perform better in FY26-27 – growth or value?
A) Between growth and value, my tilt is almost always towards growth. Unless we are in the middle of a bear market or staring at a screaming value opportunity, growth remains the more rewarding theme over a cycle. India, after all, is still a structural growth story.
That said, growth investing doesn’t mean blind chasing of high multiples. Growth has to come at a reasonable price.
Quality companies with strong earnings visibility, pricing power, and scalable business models deserve a premium, but one must avoid paying for hope alone. In FY26-27, I see growth-led themes continuing to outperform.
Q) How are you interpreting the new IPOs hitting D-Street?
A) With over $5 billion likely to be mobilized, the IPO rush is buoyed by strong domestic flows. Tata Capital has a diversified retail and SME loan book, healthy asset quality, and omni-channel distribution network, making it well placed to capture India’s rising credit demand.
The recent integration of Tata Motors Finance further strengthens its footprint in commercial vehicle financing. In the consumer space, LG Electronics offers a robust growth story.
With a retail network spanning 36,000+ outlets, consistent revenue momentum, and a debt-free balance sheet, it combines scale with financial prudence. Product innovation in high-demand categories like inverter ACs underpins its market leadership. WeWork India, however, is trickier. The flexible workspace story has appeal, but the model remains untested in India’s cost-conscious environment.
Q) We are seeing Rs 28,000 crore a month in SIPs. Are Indians really investing, or just automating without a plan? What are your views?
A) Retail investors have increasingly recognized that the Indian economy is a structural growth story, and over the long term, equities have consistently outperformed fixed deposits and other traditional avenues. That awareness has seeped in.
Even if most retail investors aren’t equipped to pick individual stocks or sectors, they’re comfortable entrusting money to professional fund managers.
We should also credit years of consistent investor education and awareness campaigns by AMCs, regulators, and media. They’ve helped shift investor behaviour from speculation to disciplined, long-term investing. So yes, SIPs are automated in execution, but the intent behind them is very real.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
as a Reliable and Trusted News Source