After a phase of consolidation and earnings moderation in the ongoing Samvat year, the stage seems set for a fresh rally — driven by normalised valuations, resilient domestic flows, and the promise of earnings rebound in FY27. While global uncertainties lingering, particularly around trade developments with the US, the spotlight is firmly on domestic growth themes. Nandish Shah, AVP– PCG Research & Advisory, (Fundamental) Wealth Management, Motilal Oswal Financial Services, highlights the outlook for next Samvat, top stock bets and how to approach the upcoming Mahurat trading session. Edited experts:

Market seems to have found its mojo back. Do you see the index hitting a new high in the run-up to Diwali?

Indian equities delivered a strong run in FY20–24, with Nifty earnings compounding at ~20% and the index outperforming global peers. Since late FY24, however, the narrative has shifted to time correction. Nifty earnings grew just ~5% in FY25, and FY26 is expected to remain in mid-single digit with Nifty EPS at ~ ₹1,096. From FY27, we see a sharp rebound with Nifty EPS projected at ~ ₹1,274, translating into ~16% growth, led by Financials, Autos, Capital Goods and Consumption.

Valuations, too, have normalised. Nifty’s one-year forward P/E now stands at ~20.6x, almost in line with its long-period average of 20.7x. On a trailing basis, the P/E has cooled to ~23.2x versus ~27x a year ago, allowing earnings to catch up with prices. With earnings bottoming in FY26 and recovery visibility into FY27, coupled with normalised valuations, we believe the consolidation phase is setting the stage for the next leg of the rally. By end-CY25, markets should have found a clearer direction, backed by earnings acceleration, supportive macros and policy continuity. We remain cautiously optimistic for the markets. Any positive development on the US tariff front would be a trigger for the markets in the short term.

What should be the investor’s strategy for the Muhurat trading session this time?

Investors should focus on the domestic theme given the uncertainty on the global macro front. We have seen India’s consumption recovery gathering pace, aided by GST2.0 rate cuts, easing inflation, and improving rural sentiment. Consumer discretionary is likely to outperform consumer staples. We like the consumer discretionary space as higher income levels and aspiration to consume would lead to higher growth for the sector.

Themes such as travel and hospitality are benefiting from robust domestic tourism and sustained occupancies, yet the durability of this cycle is not fully priced in. Mass-market retail in tier-2 and tier-3 towns is also expanding as consumers shift from unorganised to organised players. Other areas, including alco-beverages and premium apparel, are supported by rising disposable incomes and premiumisation trends. While staples recovery is more visible, the market continues to underappreciate the long-term durability of these discretionary segments, which could emerge as key drivers of India’s consumption story going forward.

Can you suggest some stocks for investors that they can buy in Samvat 2082?

We would like to stick with large and mid-cap names, given that small-caps are still overvalued. Our portfolio positioning remains overweight on Autos, Industrials, Healthcare, BFSI, and Consumer Discretionary, while underweight on Oil & Gas, Cement, and Metals.

Autos are supported by GST cuts, lower interest rates, and a rural demand recovery, making them one of the strongest earnings drivers. Industrials and EMS benefit from robust order books, policy-led capex, and manufacturing incentives, keeping growth momentum intact. Healthcare offers steady compounding, with strong demand in pharmaceuticals, diagnostics, and hospitals.

On the consumption side, discretionary themes such as travel, leisure, and quick commerce continue to expand, supported by premiumisation and formalisation. In contrast, global cyclicals like IT services and Metals face external headwinds. Selectivity will remain crucial, but domestically driven sectors are best positioned to deliver superior alpha in this cycle.

Our preferred stock ideas are as follows: ICICI Bank, Max Financial, Shriram Finance, Bharti Artel, Eternal, Bharat Electronics, Interglobe Aviation, Nippon Life India AMC, One 97 Communications, Polycab India, Radico Khaitan, Lemon Tree Hotel, Vishal Mega Mart and VIP Industries.

US trade deal is a major roadblock for market. Do you see a decline in the absence of a positive outcome?

We don’t expect a major decline for the markets in case of no positive outcome on the US trade deal front. India has already started the trade talks with countries and has started signing bilateral agreement on the trade front. Additionally, as of May 25, India’s share of total US imports was approximately 3.1% making it the 10 largest partner for the US. The share is comparatively lower on the merchandise front.

What will drive the Indian stock market in Samvat 2082?

Recovery in earnings growth, foreign institutional investors turning buyers, and domestic flows remaining resilient would drive the Indian stock markets in Samvat 2082.

With FY26 earnings likely to post mid-single growth (~ ₹1,096 EPS), valuations have now normalised, with one-year forward P/E at ~20.6x, near its long-period average. From Q3FY26, earnings recovery should gain traction, with FY27 EPS forecast at ~ ₹1,274 (~16% growth). With earnings bottoming and valuations turning more reasonable, we expect that FII flows are likely to revive.

FII flows have been weak over the past year as earnings slowed, valuations stayed elevated, and global sentiment remained cautious. Since the Sep’24 market peak, FIIs have sold about USD 27 billion, including USD 15.3 billion in CY25 YTD, even as DIIs infused a record USD 67 billion in 9MCY25, cushioning markets. Historically, flows have tracked earnings and valuations: in CY20–21, when Nifty earnings surged, FIIs invested USD 21–23 billion, while muted earnings in later years kept inflows subdued.

DII infused a record ~USD89b into Indian equities over the past year, effectively offsetting FII selling of ~USD29b, since Sep’24. This resilience has been supported by robust monthly SIP inflows of ~USD3b, which have consistently bolstered DII participation. Also, the ample domestic liquidity effortlessly absorbs all primary market issuance throughout the year.

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.