'FPIs, capex and earnings will drive markets up in Samvat 2082'

India is a market where exit is easy but entry is tough, says Nilesh Shah, MD of Kotak Mahindra AMC, the fifth-largest mutual fund based on quarterly assets under management (AUM) as of September-end.

- Dipti Sharma [e-mail]

Out of Kotak Mahindra AMC’s overall AUM of ₹35.26 trillion, equity is ₹3.12 trillion.

It’s a classic fear versus Fear of Missing Out (Fomo) scenario: if FPIs spook DIIs, the fear will win; if DIIs create Fomo among FPIs, they may turn buyers, pushing the market up, he explained.

“Currently, the market is in a sideways phase with no major upswings, which may continue unless there’s a big correction.” Over the longer term, fundamentals will prevail, he believes, adding that the biggest driver for India’s equity market is earnings growth. He added, “If earnings rebound to double digits—supported by a US tariff deal, domestic stimulus, and a revival in private capex—the market will move up”.

Edited excerpts:

Last Samvat wasn’t exactly a blockbuster for the Nifty; it lagged most global markets. What's your reading for the year ahead, and is India still the go-to investment story?

FPIs selling shares of Indian companies aren’t disputing India’s growth; they're confident India will contribute to global growth alongside US and China. Their concern is valuation.

FY27 Nifty 50 EPS is expected to be around ₹1,200, with Nifty at 24,000—a Price to Earnings (P/E) ratio of 20. Sellers believe EPS will continue to grow and, in a few years, reach ₹2,000, but the question is whether the P/E will remain at 20 or drop to 12, as seen in China. If it drops, Nifty could still be 24,000 even after earnings move up—meaning no returns.

FPIs are cautious for three reasons: earnings growth in the last six quarters has been single-digit, while valuations are double-digit; US tariffs are hurting the economy; and IPO supply is high, with promoters, insiders who know their companies best, selling.