He believes that strong fundamentals, easing headwinds, and returning foreign flows will likely drive high double-digit returns for investors over the next 12 months.
“We’ve moved from cautiously optimistic to outright optimistic. The markets have formed a strong bottom and are ready for a meaningful rally,” Agarwal said in an interview with ET Now.
Why Piper Serica expects a market upswing
Agarwal pointed to multiple factors behind his bullish view:
Reversal of FPI outflows: After nearly $15 billion in selling by foreign investors last year, flows are beginning to turn positive.
Improving fundamentals: Domestic consumption remains strong, with rural recovery and GST cuts aiding demand.RBI policy easing: Expected rate cuts could further stimulate growth and liquidity.Global positioning: “India’s weightage in global indices will rise as earnings improve,” he added.
He emphasized that investors should not remain underinvested expecting a correction. “This is the time to look for opportunities, not to sit on the sidelines,” Agarwal said.
Banking and financials lead the comeback
Agarwal highlighted banking and financial services as the most promising sector going forward, backed by both strong fundamentals and technical triggers.
“We’re seeing the end of a cyclical downturn in lending. Better credit offtake, lower NPAs, and improving NIMs will drive earnings growth for banks and NBFCs,” he said.
He expects smaller banks and NBFCs, particularly those involved in unsecured and microfinance lending, to witness rerating as earnings improve and investor ownership normalizes.
IT stocks to lag; FMCG, manufacturing, and domestic plays to outperform
On the earnings front, Agarwal expects second-half FY25 to show stronger growth across domestic-oriented sectors.
“FMCG heavyweights like Hindustan Unilever and Nestle are seeing demand recovery driven by GST cuts and rising disposable incomes,” he said.
He also pointed to electronics manufacturing (EMS) as a key growth theme, citing strong numbers from Syrma, Kaynes, and Amber — beneficiaries of the government’s “Make in India” push.
However, Agarwal remains cautious on IT services, calling the sector “structurally weak” in the near term.
“IT guidance remains in the 2–3% range; there are no immediate growth triggers beyond buybacks,” he noted.
What investors should focus on
According to Agarwal, investors should:
- Stay fully invested with a 12–18 month view.
- Focus on lenders, consumption plays, and manufacturing sectors.
- Avoid overexposure to IT and export-dependent businesses.
- Be ready for portfolio reallocation as FPIs return and valuations normalize.
“Smaller financials and domestic consumption names could deliver superior returns as the earnings recovery broadens,” he said.
Second half of FY25 to drive earnings growth
Piper Serica expects the second half of FY25 to deliver better earnings momentum across sectors, supported by improving demand, softer interest rates, and policy continuity.
“India is entering a new growth phase,” Agarwal concluded. “For long-term investors, the opportunity lies in staying invested — not timing the market.”