In an interaction with CNBC-TV18 on Friday, April 25, Arora said just as the initial reaction on US President Donald Trump’s tariffs was overdone, the pullback from the lows has been equally surprising.
One of the key factors behind his view is that the market is still in an earnings downgrade cycle.
“If you look at banking, at best, we will do around 10% to 12% earnings growth this year. Consumer staples will be lucky to do that. Reliance will probability be around the same level as well,” Arora said, adding that the first quarter earnings will give the Street more clarity on how the year is likely to shape up.
Arora went on to say that the market will be lucky to see earnings growth of over 10% in financial year 2026, as he believes that the extent of the earnings cuts have not been factored in.
“There is no justification for the market to have bounced back. Pretty much everything that the market wants to know, it knows. It knows that the worst of the tariffs is behind, Fed may cut by another 50 bps, as will the Reserve Bank of India. Both the US and Indian bond yields have factored that in,” Arora added.
Amidst the current market volatility, Arora suggests that some exposure to gold may “not be a bad idea” as the yellow metal has been among the top three asset classes in terms of returns in seven out of the last 10 years and the best performer in four of them.
“I’m not saying go all in, into the yellow metal. I’m just saying that some amount of diversification, given that valuations don’t look as cheap,” said Arora.
The CEO of Nirmal Bang Institutional Equities is positive on financial services but not on the banking space as he believes that the current rally is mostly banking driven.
“I would look at auto finance, I would look at life insurance. I would look at general insurance, housing finance companies. Anything NBFC, because growth is still there. Valuations are not cheap. The market wants growth. It’s as simple as that,” he said.
The Nifty 50 index is down over 260 points on Friday after geopolitical tensions between India and Pakistan are on the rise after the terrorist attack in Jammu & Kashmir’s Pahalgam. The Nifty snapped a seven-day gaining streak on Thursday.