Indian investors can breathe a little easier. Market veteran Manish Sonthalia says the toughest part of 2025 may be over and the next few years could bring healthier earnings and a steadier rupee.
Why the Mood Is Shifting
Sonthalia notes that the sharp fall of the rupee to around 91 per dollar has been a major drag. He believes that level is “overdone” and expects the currency to stop weakening, which should help companies’ bottom lines.
What Earnings Could Look Like
For the current fiscal year, he expects modest growth – about 9% revenue growth and slightly lower profit growth. But looking ahead to FY27, he sees a clearer upside, with earnings potentially rising 13‑14% thanks to government support and a more stable macro environment.
Are Valuations Too High?
Even if earnings grow at a conservative 11‑12% pace, the Nifty 50 is trading at roughly 21‑22 times earnings. That gives a price‑to‑earnings‑to‑growth (PEG) ratio under 2, which Sonthalia says does not signal an overvalued market.
Small‑Cap Stocks: Not Just a Bubble
The small‑cap segment often gets labeled as frothy, but Sonthalia points out that its valuations are close to three‑ and five‑year median levels. Earnings in this space could still grow around 14‑15%.
What Could Trigger Moves?
Volatility remains low, indicating that neither bulls nor bears are in a rush. Investors are watching for possible trade‑deal news in the coming months, which could provide the next market catalyst.
Bottom Line
Overall, the mix of improving macro conditions, reasonable valuations, and potential earnings growth tips the scale slightly toward the positive side. Still, key risks remain, and investors should stay alert to new developments.
Remember, this is perspective, not prediction. Do your own research and consider your risk tolerance before making any investment decisions.