Moderate Your Return Expectations: Nilesh Shah’s Market Outlook
eyond the 10% cap, without divesting.
When it comes to the overall fundamentals of the economy, Shah is optimistic about things improving. While the first half of the year may have been subdued, the second half of FY 25 is expected to be better. The consumption story, which was subdued in urban India but picking up in rural India, is likely to get a boost with weddings, festivals, and an increase in government spending.
Shah also touches on the issue of debt-funded consumption, noting that people who have borrowed money to speculate or spend are now cutting back on their consumption.
Regarding the selling by foreign investors, Shah believes that now that they have been selling aggressively and moving towards the US, the intensity of their selling should come down. With this, along with improving fundamentals, we can expect the markets to perform well.
However, Shah does offer a word of caution. He acknowledges that the market is already trading at high valuations compared to the rest of the world. This means that returns will likely have to come from earnings growth, which he estimates to be in the high single digit or low double-digit range. Therefore, he advises investors to moderate their expectations on returns, as the high returns seen in the past five years may not be repeated in the next five.
Despite these factors, Shah remains optimistic about the long-term growth story of India. He emphasizes the importance of being a long-term investor in a country where growth opportunities abound.
In conclusion, while the market outlook may be positive, it’s essential to keep expectations realistic and focus on quality investments for long-term growth.
