Ambit''s Bhasin: Indian Equity Market Sideways, Muted Returns

Mumbai, Jun 24 (PTI) The Indian equity market is likely to remain sideways, and investors should keep return expectations muted, as valuations and global opportunities could limit upside, a top official at Ambit Institutional Equities said on Wednesday.

Nitin Bhasin, head of institutional equities at Ambit, told PTI in an interview that Indian markets have recovered from the lows seen in March as domestic investors found valuations attractive, but the broader market outlook remains cautious.

"For the last year-and-a-half or slightly more than that, since September 2024, we've had a call that India is a sideways market," Bhasin added.

Foreign portfolio investors (FPIs) were not finding India attractive in terms of valuations or earnings upgrades compared to opportunities available globally, he said, adding that the market could remain sideways with low returns or a low downside.

Bhasin said investors should not expect major returns from large-cap indices.

"I would still prefer people to have muted expectations of major returns from major indexes like large caps, whether it is Nifty or Sensex," he said.

Ambit continues to prefer large caps over mid and small caps.

"Small caps are the least preferred," Bhasin said, adding that large caps offer more safety due to earnings concentration in a sideways or slightly lower market environment.


On the macro outlook, Bhasin said the easing of West Asia-related risks could lead to normalisation in some key economic factors, including crude prices, the rupee and bond yields.

"The factors I would actually look out for the next month or two, even in the next two or three quarters, would be what happens to the crude import bill, which had actually shot up for a few months in India. Where does that settle?" he said.

Bhasin said crude price normalisation would be an important factor for the Indian economy, while inflation pressures could remain contained as the entire fuel cost increase was not passed on to consumers.

"We did not pass on the entire fuel cost increase. So, it hasn't actually played out. Had the war continued for a little bit longer, inflation would have been higher," he said.

On bond yields, Bhasin said yields are expected to normalise after the recent volatility.

"Because of all of this, the yields also should actually settle down," he said, adding that yields, which were earlier expected to move closer to 7.4-7.5 per cent, had settled around 7-7.2 per cent.

On foreign fund flows, Bhasin said he does not expect a repeat of the sharp FPI selling witnessed in February and March.

"I don't expect a major sharp reselling from the FPIs...which happened in February or March. It could be a more muted selling or perhaps less upselling," he said.

Bhasin added that easing risks could provide sentiment relief for markets through some normalisation in rupee movement, yields and broader economic expectations.