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Rishi Kohli, Chief Investment Officer at Jio BlackRock AMC, has expressed an 'incrementally bullish' outlook on Indian equity markets, anticipating that midcap companies will spearhead the nation's earnings growth in FY27. He believes the cycle of declining corporate earnings is nearing its end, supported by positive market indicators and seasonal trends.
Market Outlook Turns Bullish
- Rishi Kohli, Chief Investment Officer at Jio BlackRock Asset Management Company, shared a positive outlook on Indian equity markets in an exclusive interview.
- He stated he has turned "incrementally bullish" over the past month and a half, citing aligning indicators, earnings trends, and valuations as reasons for his optimism.
Reasons for Market Recovery
- Kohli explained that the market softness observed from September-October 2024 was primarily due to an overheated market, both in terms of valuations and technical positioning.
- The current recovery is being driven by a shift away from this overheated state towards more sustainable levels.
Earnings Revival and Midcap Potential
- A significant turning point anticipated by Kohli is the end of the corporate earnings degrowth cycle.
- After several quarters of earnings downgrades following strong performance in FY23-24, the latest quarterly results indicate an "early sign of a rebound" with a "very minor uptick."
- Midcap companies are identified as being uniquely positioned to benefit the most from this anticipated earnings revival and drive future growth.
Near-Term Sentiment and Risks
- Positive seasonality typically supports market sentiment in the November-December period, suggesting a potential upward trend for the remainder of December.
- However, Kohli cautioned about potential volatility in January-February, partly driven by unresolved tariff-related uncertainties.
- Any flip-flopping on tariff policies could further exacerbate this near-term volatility.
Long-Term Growth Prospects
- Kohli believes that once visibility improves with December and March quarter earnings reports, and the tariff overhang settles, markets are expected to build significant momentum.
- He forecasts "one or two very strong years for the Indian market" starting from March onwards.
Impact
- This positive outlook from a major asset management firm could significantly boost investor confidence, particularly in the midcap segment of the Indian equity market.
- It may encourage increased investment inflows into midcap stocks, potentially leading to capital appreciation for Indian investors and supporting broader economic growth.
- Impact Rating: 8
Difficult Terms Explained
- Midcap companies: Medium-sized companies based on their market capitalization. They often represent a balance of growth potential and manageable risk.
- FY27: Fiscal Year 2027, which in India runs from April 1, 2026, to March 31, 2027.
- Earnings expansion: An increase in the profits generated by companies.
- Incrementally bullish: Becoming slightly more optimistic about the future performance of the market or an asset.
- Valuation-wise: Relating to the assessment of the current worth or price of an asset or company.
- Technically: Refers to technical analysis, a method of forecasting future price movements based on historical price and volume data.
- Earnings degrowth cycle: A period during which the profits of companies are decreasing.
- Uptick: A small increase or upward movement in data or trends.
- Seasonality: The tendency for financial markets or economic indicators to exhibit patterns related to the time of year.
- Volatility: The degree to which the price of an asset fluctuates over time. High volatility means prices change rapidly and significantly.
- Tariff-related uncertainties: Doubts or unpredictability concerning import/export taxes or duties imposed by governments.
- Overhang: A persistent factor or uncertainty that creates downward pressure or caution in the market.