It Will Be Tougher to Get Market-Beating Returns Over Medium Term

The biggest event will be the end of the 90-day tariff pause. Another important area is commodity prices. Anand Shah CIO, PMS & AIF, ICICI Prudential AMC

- Dipti Sharma

The Indian market is entering a phase of subdued returns over the medium term as it will be tougher to generate alpha or excess returns over an underlying benchmark, according to Anand Shah of ICICI Prudential Asset Management Co.

"I think the biggest event (ahead) will be the end of the 90-day tariff pause—that remains the key event," said Shah, chief investment officer—portfolio management services and alternative investment funds at India's second-largest asset manager.

The real challenge for equities is sentiment and behaviour, he said. While corporates and banks remain cautious, markets have priced in overly optimistic global outcomes—risking disappointment, as seen since September 2024, he said.

Edited excerpts:

How do you interpret the current market volatility? There is noticeable uncertainty surrounding Trump's tariff policies. In the short term, the market will always be volatile on either side. And with every result, you will have a different reaction. The more important aspect is the medium-term.

If you look at the period from 2010 to 2020, the GDP growth rate was normal—around 11 to 12% CAGR (compound annual growth rate). However, India Inc. was suffering. So, India Inc.'s profitability from 2010 to 2020 was very low—in the single digits, around 2 to 3% CAGR.

If I break that down further, the NSE 500 profits-to-GDP fell from 4.7% in 2010 to almost 2.7% in 2018-19, and then to 2% in 2020, which was a Covid year. But that sharp drop in profits-to-GDP meant GDP grew, but profits did not.