At 23x FY26 earnings, the market is too expensive to justify a rally, especially with Nifty earnings expected to grow only 8–9% this year after a muted 3–3.5% in FY25. Persistent FII selling—absorbed largely by strong domestic flows—will keep markets range-bound, he added.
FY27 looks brighter
Balasubramaniam expects FY27 earnings to improve meaningfully, driven by:
- Private sector banks: 11–12% loan growth and NIM expansion
- Consumption revival: aided by recent income-tax and GST cuts
- Expected upgrades in autos and FMCG as demand accelerates
He believes that once earnings visibility strengthens, banks and financials—key FII overweight sectors—will lead the next leg of market performance.
India Inc still bullish, investors waiting for right valuations
JM Financial’s three-day investor conference drew 200 corporates and 750–800 investors, with high interest in autos, electronics, renewables, data centres, and new-age tech. While global and domestic investors remain convinced about India’s long-term structural story, most are waiting for better entry points as valuations remain stretched across sectors.
Where is value today?
Balasubramaniam says the only value pockets left are:
- Private sector banks (trading near long-term averages)
- PSU banks (trading one standard deviation below mean)
- Most other sectors are trading far above historical valuations, making fresh buys difficult.
Will FIIs return soon?
FIIs have withdrawn $24 billion from the secondary market this year, but invested $7–8 billion in IPOs—indicating selective participation. Large flows have shifted to China, which saw $70 billion of inflows in August–September.FIIs will return, he said, when valuations ease and quality ideas emerge at the right price.