Bhansali noted that the current phase of sideways movement has lasted nearly a year—similar to the 18-month consolidation witnessed between October 2021 and June 2023. Despite strong GDP growth, he pointed out that nominal GDP expansion remains in single digits, weighing on corporate profitability.
“Profit growth has been slipping quarter after quarter. While Q1 may have marked a bottom, Q2 earnings could also remain subdued due to loss of sales between the GST announcement in mid-August and the festive season. However, if festive demand revives sentiment, Q3 onwards we may see an earnings uptick, setting the stage for markets to move higher by early 2025,” Bhansali explained.
Consumption, automobiles, and retail lending in focus
Ambit AMC has repositioned portfolios towards domestic-facing sectors, particularly automobiles and discretionary consumption at both the mass and premium ends. The fund house has also started building positions in selective retail lenders, including unsecured credit players.
“Exports to the US are best avoided in this environment given volatility and policy uncertainty. Domestic consumption offers better visibility, and once private capex picks up on the back of rising capacity utilization, corporate lenders will also benefit,” Bhansali said.
Retail-led banks and NBFCs well-positioned
With credit card spends, UPI transactions, and digital payments surging during the festive period, Bhansali expects retail-focused banks and NBFCs to gain in the near term.
“Corporate banking will take more time to deliver, but retail banks are well-placed to ride the consumption cycle. Over the long term, once utilization crosses 80%, private capex and corporate lending will also contribute meaningfully,” he added.
FII outflows, but interest in India rising
Foreign institutional investors (FIIs) have turned net sellers in recent months, pressuring the indices. However, Bhansali believes global investor sentiment on India is improving.“I am heading on a roadshow to the US and Canada, and the reception towards India has been phenomenal. Once the tariff overhang is resolved and interest rates decline further, FII inflows should return over the next few months. Combined with strong domestic flows, this could power markets higher into 2026,” he said.
Market outlook
According to Bhansali, the near-term market direction hinges on Q3 earnings and festive consumption trends. While consolidation may persist for a few more months, India’s domestic demand, steady SIP flows, and an eventual FII comeback are expected to be the key triggers for the next rally.
“2026 could shape up to be a strong year for Indian equities,” Bhansali concluded.