'See limited downside for markets from current levels'

Markets have taken recent policy-related and geopolitical developments in stride. Kunal Vora, head of India equity research at BNP Paribas Bank, tells Puneet Wadhwa in an email interview that while Nifty 50 earnings are not highly sensitive to US tariffs, a resolution would improve investor confidence, particularly among foreign investors.

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Edited excerpts:

Is the risk/reward favourable for stock market investors at current levels?

The risk/reward looks favourable to us. Indian markets have gone through a consolidation phase, with the Nifty 50 largely flat over the past year, underperforming other emerging markets (EMs). This underperformance can largely be attributed to earnings estimate cuts, with Nifty 50 2025-26 (FY26)/2026-27 (FY27) earnings per share estimates having been lowered by 12-13 percent from their peaks.

While the Nifty’s price-to-earnings ratio of 20x is still above the long-term average of 17x, we remain positive due to the likely improvement in the growth trajectory. This is supported by measures such as cuts in direct and indirect taxes, lower interest rates, continued strong domestic flows, moderation in the pace of earnings cuts, and a reduction in India’s valuation premium versus China and other EMs.

High-frequency economic indicators remain weak but have yet to fully reflect recent positive developments. Nifty 50 earnings are not very sensitive to US tariffs, but a resolution would enhance investor confidence, particularly among foreign investors.

What is the worst we can see onthe Sensex and Nifty?