'Past year certainly raised doubts about the bull run'

It’s been a testing first half of 2025-26 for Indian equity markets.

- 

Mahesh Patil, chief investment officer at Aditya Birla Sun Life Asset Management Company, tells Puneet Wadhwa in an email interview that the outlook for the next Samvat is looking more constructive, as several headwinds are slowly turning into tailwinds. Edited excerpts:

Do you think the bull run in Indian equities is coming to an end as they face headwinds from US tariffs, sluggish earnings, and high valuations?

The past year certainly raised doubts about the bull run, given sluggish earnings, trade tariffs, geopolitical risks, and a restrictive monetary policy. Indian markets underperformed both global and emerging market peers, and valuations looked stretched. However, most of these headwinds are now easing, and the markets entering a healthier phase.

Over the next 12 months, we expect earnings growth to align more closely with nominal GDP growth of 10-12 per cent. The outlook for the next Samvat is more constructive, as many of the earlier drags are gradually becoming supports.

Have the markets run ahead of economic fundamentals?

Over the long term, Indian equities have largely tracked the trajectory of economic growth. Post-pandemic, however, markets sprinted ahead of the broader economy, creating a visible gap between total market capitalisation and GDP during 2021-22 to 2023-24 — reaching 30 per cent at its peak.