Following a rare period of sustained underperformance, Indian equity markets may be primed for a decisive recovery in the second half of the fiscal year, driven by robust macro fundamentals and domestic liquidity buffers, according to Sachin Relekar, Senior Equity Fund Manager at Axis AMC (managing 3.66 trillion rupees / $38.5 billion in AUM).
📌 Key Macro Pressures & Benchmark Performance:
• 12% Drawdown Snaps 10-Year Streak: The benchmark Nifty 50 has dropped ~12% year-to-date, snapping a decade of consecutive annual gains under the weight of geopolitical headwinds and elevated crude oil prices.
• Record $31.3 Billion Foreign Outflows: Foreign portfolio investors pulled a record $31.3 billion out of Indian shares, largely reallocating capital toward global markets offering direct exposure to the artificial intelligence boom.
• Macro Headwinds vs. Sovereign Resilience: While markets confront elevated energy costs and tight global monetary conditions, India’s sustained GDP expansion above 7% serves as an anchor for corporate earnings stability.
📌 Domestic Capital Cushion & Strategic Allocations:
• Financialization of Household Savings: Relentless domestic institutional inflows continue to absorb foreign selling pressure, supported by a structural transition of household wealth from bank fixed deposits into public equities.
• Compelling Risk-Reward Asymmetry: Corporate profitability has continued to grow even as equity prices compressed due to external macro noise, substantially improving valuations relative to last year.
• Sector Playbook: Axis AMC is targeting AI-related capex, power & electrification, domestic manufacturing, and consumer internet, while maintaining strong overweights in private-sector banks and NBFCs on attractive valuations.
• Sectors to Avoid: Capital allocators caution against legacy business models vulnerable to rapid technological disruption or direct pricing pressure from hyper-competitive e-commerce ecosystems.
💡 Market Takeaway: Near-term foreign capital outflows reflect external currency and energy shocks rather than structural domestic weakness. With valuation multiples compressed and earnings compounding above 7% economic growth, the risk-reward equation for Indian equities is tilting favorably toward recovery.