Expert view: Indian stock market may hit a record high during the festive season; pharma can be a strong contra bet

Mint

15 hours ago

Expert view: The Indian stock market may surpass previous highs in the second half of the year, especially during the festive season, says Ankit Patel, the co-founder at Arunasset Investment Services. Talking to Mint's Nishant Kumar, Patel says investors should be disciplined and focused during times of uncertainty. Further, he believes pharma can serve as a strong contra bet. In an interview with Mint, Patel shared his views on markets, sectors that can generate alpha and his expectations from Q1FY26 results. Here are edited excerpts of the interview:
The first half of the calendar year 2025 (H1CY25) experienced a sluggish start due to delayed government spending, primarily caused by election-related activities in the early months.
However, February marked a turning point when the Reserve Bank of India (RBI) adopted an accommodative stance—cutting interest rates, injecting liquidity, and relaxing banking regulations—which set the economy on a higher growth trajectory.
Q4 FY25 GDP growth was strong at 7.4 per cent, reflecting economic resilience. Also, RBI's record dividend pay-out of ₹ 2.69 lakh crore for FY25—one of the highest in recent history—further bolstered fiscal stability and the overall economic environment.
India's macro fundamentals remain robust, with inflation at 2.82 per cent and high forex reserves, making the markets attractive. FIIs have been net buyers for four consecutive months, bringing in roughly ₹ 23,000 crore.
With consumption poised to lead in the second half (H2) and sectoral support, markets are expected to surpass last year's highs, especially during the festive season.
Geopolitical tensions have indeed become the new normal for markets, creating high levels of global uncertainty.
However, markets naturally experience headwinds and tailwinds, and uncertainty often opens doors for strategic investing.
Historically, asset values tend to increase when markets stabilise following periods of volatility, turning uncertainty into potential opportunity.
To protect and grow wealth during such times, investors must adhere to disciplined strategies and avoid emotional decision-making. Maintaining a long-term perspective and sticking to well-defined plans are key.
In the Indian context, despite global geopolitical challenges, markets have delivered positive results due to strong macroeconomic fundamentals, controlled inflation, and supportive monetary policies.
By staying focused and disciplined, investors can navigate these turbulent times effectively and turn uncertainty into opportunities for wealth preservation and growth.
Merchandise exports to the USA account for roughly 1.2 per cent of India's GDP. Pharmaceuticals are the top (14 per cent) merchandise exports to the USA, and they are exempt from the Trump tariff.
The other sectors, like gems and jewellery, diamonds, and petrochemicals, do not have much exposure to stock markets.
Engineering goods and auto components could really impact the stock market. Together, they account for a large percentage of India's engineering exports to the US (valued at around $5 billion), which will be affected.
The main impact will be the FDI flow, which will be affected due to policy uncertainty. This will affect the entire globe, not just India.
Policy uncertainty is the worst thing for private investment. Hope is that consumption will offset this.
Rate cuts and liquidity injections have happened and a very important factor here is that inflation is low.
Although the RBI reduced its inflation forecast to 3.7 per cent from its earlier projected 4 per cent for FY25-26, it is very likely that inflation will average around 2.5 per cent for the next six months.
Such low inflation creates real purchasing power, and this is a recipe that usually results in increased consumption.
An effective investment strategy should be tailored to individual goals, risk appetite, and comfort level with various asset classes. The key lies in understanding market cycles and aligning them with personal requirements, enabling better timing and allocation.
Diversification across asset classes such as equities, bonds, real estate, and gold helps spread risk and optimise returns.
Importantly, investors should remain unaffected by outside noise and market volatility. Staying disciplined, sticking to a well-defined plan, and making rational decisions are crucial for long-term success.
Emotions can often drive poor choices, so maintaining a balanced perspective and focus on fundamentals will help build wealth steadily.
Ultimately, a disciplined, goal-based approach and proper diversification are the foundation of a resilient and successful investment journey.
To achieve alpha beyond traditional investment methods, investors should explore alternative strategies that offer higher return potential.
Using PMS with high-conviction stock picks, which are not strictly benchmark-driven, can deliver stronger growth by focusing on select stocks with long-term potential.
Additionally, participating in private equity, pre-IPO investments, buybacks, mergers and acquisitions, and IPOs can significantly enhance wealth creation opportunities by tapping into early-stage growth and corporate restructuring.
The performing credit space, especially through category AIF funds, has gained popularity among high-net-worth individuals (HNIs) for its ability to generate consistent double-digit returns over time.
Moreover, investing abroad via funds available in GIFT City, which allows transactions in foreign currencies, helps diversify currency risk.
These alternative strategies provide diversified, high-potential avenues for investors seeking superior wealth accumulation and portfolio resilience.
Pharma can serve as a strong contra bet for stock market investing. Despite market volatility, the pharma sector remains resilient due to consistent domestic demand and exports.
India's pharmaceutical exports reached $24 billion in FY23, growing at 15 per cent annually, driven by generic medicines and vaccines.
Government initiatives like 'Pharma Vision 2020' and increased healthcare spending support the sector's long-term growth prospects.
Moreover, pharma stocks often trade at lower valuations compared to other sectors.
During market downturns, select pharma companies tend to outperform, offering stability and upside potential.
This contrarian stance can help diversify risk and capitalise on the sector's growth amid broader market uncertainties.
Based on Q4FY25, the BSE 500 cohort showed a 10 per cent PAT growth and revenue growth of around 7 per cent.
We expect profit growth to be slightly higher in Q1FY26 due to mild input cost reduction, a favourable base, and a continued rural demand recovery supported by a timely monsoon.
With inflation expected to average around 2.5 per cent over the next six months, real purchasing power will increase, boosting consumption, moderated by monetary easing policies.
Improved credit growth could benefit banking and financial services, while low interest rates are likely to boost real estate activity.
However, recent market movements have been highly correlated across sectors, mainly driven by India's macroeconomic stability.
Going forward, we see a shift towards a stock-picker's market, emphasising the need for selective investing rather than outsized bets on specific sectors.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.