Talking to ET Now, Sheth highlighted that while India has been among the worst global performers in dollar terms this year — even as some emerging peers rallied 60–70% — the combination of earnings catch-up, time correction and improving macros sets the stage for a stronger 2026.
Broader markets look attractive, not just largecaps
While Nifty’s heavyweights have powered recent highs, Sheth argues that the real opportunity lies in midcaps and smallcaps.
“Many sectors within the broader market are compounding at 25–30% earnings growth, far above the Nifty’s 12–13%,” he notes.
Manufacturing, EMS, platform companies and the fast-expanding solar ecosystem offer strong multi-year visibility, making India a “delight market” for diversified stock pickers.
Primary market frenzy is healthy, not excessive
India’s IPO pipeline remains robust, with heavy oversubscriptions and strong listings. Sheth rejects the view that this signals irrational exuberance.“This is a healthy, vibrant market. Promoters prefer equity over debt after the last decade’s challenges. There’s demand, there’s supply — this is good for India,” he says.He also cautions against reading too much into grey-market premiums or massive subscription numbers: “Intrinsic value matters more than the listing pop.”
Banks & NBFCs will lead the next phase of Nifty’s rally
Sheth is unequivocal that financials, especially NBFCs, will drive the Nifty’s next breakout.
- Credit growth, muted last year, is set to accelerate
- Repo rate cuts are expected to continue
- NIM expectations and earnings upgrades are improving
Valuations remain reasonable
Large NBFCs such as Aditya Birla Capital and L&T Finance are doubling their loan books every three years while delivering 15–16% ROE, making them prime beneficiaries of the rate and credit cycle.
GST cuts already boosting demand
The recent GST rationalisation has begun lifting Q3 numbers, Sheth says, but the bigger story is its long-term impact.
For sectors like two-wheelers and small cars, where affordability had fallen faster than income growth, price cuts are expected to revive multi-year volume growth.
Consumption: Favour autos, not staples
Sheth remains selective within consumption.
- Positive: Autos — strong moats, penetration tailwinds, GST boost
- Avoid: FMCG staples — high valuations, limited benefits from recent policy changes
- Brands like Nestle, HUL and Asian Paints may underperform in the coming bull cycle, he warns.
Cement: The dark horse for 2025
Sheth expects cement to play a role similar to telecom three years ago — benefitting from consolidation and inherent pricing power.
“Price hikes are unlikely immediately post-GST cuts, but over a 12-month horizon, the sector looks well-positioned,” he adds.
Outlook: More highs ahead, driven by earnings
Sheth concludes that the market’s next highs will come from earnings acceleration, broader sector participation and easing rates.
Every day, India’s GDP and profits inch higher — “markets simply move in non-linear fashion.”
For investors, the message is clear: Stay diversified, focus on earnings visibility, and look beyond just the largecaps.