The risk premium for the Indian market is primarily external than internal, believes Nomura’s head of India equity research Saion Mukherjee. Also, a lot of noise around tariff has already happened, but one will have to wait and watch the actual impact.
Mukherjee was speaking at a media briefing. He said, “We have an earnings risk but if the external situation remains within limits, we could still see a positive return by the end of the year.”
He also noted that domestic flows have shown some signs of fatigue, but nothing is coming off, adding that as foreign institutional investors have been net sellers in the Indian market in the last six months, so, they don’t own enough of Indian equities. “Incrementally India is better off just from a flow perspective, in a scenario where we don’t see a big risk-off, it would be positive,” he added.
His outlook on equities is muted “like a low, mid, single-digit kind of return”. “I think it’s a decent one after a really phenomenal run in the last many years,” he said. In its latest report, Nomura had cut its March 2026 target for the Nifty 50 to 24,970, factoring in 5% more downside risks to the consensus corporate earnings.
Mukherjee explained that we are today closer to the higher end of the range than to the lower end of the range and noted there are two aspects including valuations and corporate earnings, which saw an unexpected spectacular run from FY19-FY24 and Covid acted as a catalyst.
“When I scan the consensus expectations, it seems that the market is factoring in around 15 to 16% earnings growth and this has been a habit in India, if you go back, generally, that’s the expectation where we start the year and then you see cuts happening through the course of the year,” he said.
He also pointed out challenges in the economy including the investment cycle, capex and challenges on the export side. About the impact of uncertainties in the US and global markets, especially on the IT sector, he believes that there could be further cuts in expectations, as some of these sectors are dependent on demand globally. According to him, there is some bit of strength and resilience in domestic sectors.
When asked if there will be a spillover effect from the recession in the US, Rob Subbraman, head of global macro research said, “It’s close to recession, but we are not forecasting this. A little bit of a slowdown globally is not bad for India from an equity perspective as the earnings are not so dependent on exports.”