“Markets have been consolidating for over a year due to tepid earnings, but as growth picks up in FY27, we’ll see a breakout. Government and RBI measures to boost liquidity and consumption will act as triggers,” Vyas said in an interview with ET Now.
He added that if the US-India tariff deal progresses, it could further strengthen the domestic market outlook by boosting specific export-oriented sectors.
FII selling may reverse as earnings visibility improves
Vyas believes the persistent foreign investor outflows will gradually ease as India’s earnings trajectory stabilizes.
“FIIs always chase growth. With earnings revival over the next four quarters, we expect outflows to subside and inflows to return gradually,” he said.
He pointed out that while India’s valuations remain fair, the lack of strong earnings growth had pushed investors toward markets like the US, where corporate profits surged. However, India’s improving macroeconomic momentum, reforms, and policy push could reverse the trend.
Private capex recovery likely in 12–18 months
While public capex has driven infrastructure spending for the past few years, Vyas expects private sector investment to make a comeback within the next 12–18 months.“Corporates have spent years deleveraging and strengthening their balance sheets. As capacity utilization rises and consumption improves, private capex will follow,” he said.
He added that “Make in India” incentives and global supply chain realignment from China will provide additional tailwinds for India’s manufacturing and industrial growth.
Consumption, hospitality, and real estate to drive the next growth cycle
Vyas sees consumption as the biggest near-term growth driver, supported by higher disposable income and policy shifts toward boosting demand.
“Our portfolios have been overweight on consumer discretionary for over six quarters. Disposable income growth is flowing into small-ticket discretionary spends, travel, and premiumization — not staples,” he explained.
He noted that while FMCG valuations remain expensive, the sector’s earnings growth will likely stay muted. Instead, retail, hospitality, and real estate sectors are expected to benefit the most from rising consumer confidence and demand.
Market outlook: Steady gains ahead
According to Vyas, the Nifty could see steady upside in the coming quarters, tracking corporate earnings.
“After a prolonged consolidation, the market is setting up for a 12–13% return trajectory aligned with earnings growth,” he said, adding that India remains one of the few emerging markets with a healthy balance between growth visibility and macro stability.
Key takeaways
- Market consolidation likely to end as earnings pick up in FY27.
- FIIs expected to return gradually as growth improves.
- Private capex recovery expected in 12–18 months.
- Consumption, retail, hospitality, and real estate seen as top-performing sectors.
- FMCG likely to underperform due to muted growth and high valuations.