Renowned market guru Vijay Kedia has expressed optimism for Samvat 2084, stating that the worst of the market fall is likely behind us. In a recent interview, Kedia projected a period of market recovery or sideways movement for the next six to eight months, potentially followed by a fresh bull run.
Market Outlook: Recovery and Bull Run
Kedia pointed to the significant correction in mid and smallcap segments, where many stocks have plummeted 50-70 percent from their peaks and delivered no returns over the past two years. He views this widespread downturn, even affecting mutual funds, as a sign that the crisis is nearing its end. While acknowledging the anxiety caused by investment losses, Kedia highlighted historical patterns where market bottoms often form during such crises. He believes the euphoria observed in 2022-2024 has now given way to a crisis-like situation, which traditionally precedes a reversal.
Factors Behind the Downturn
Several global and domestic factors contributed to the market's challenges, according to Kedia. Geopolitical conflicts, particularly the Iran-US situation, have directly impacted crude oil prices, which is critical for India given its high import dependency. This, coupled with a depreciating rupee, has significantly inflated the import bill. Export difficulties also arose from a five to seven-fold increase in shipping freight rates, making international trade unviable for many companies. Rising commodity prices for aluminum, steel, and copper, alongside persistent inflation, further pressured corporate profitability.
Kedia also noted continuous selling by Foreign Portfolio Investors (FPIs), which domestic retail investor inflows have only partially offset. He stressed that corporate earnings, a fundamental market driver, have largely been subdued, and while the IT sector is undergoing a revolution, it faces near-term concerns, as evidenced by Infosys's guidance cut.
Kedia's Investment Strategy and Sectors to Watch
Despite the recent volatility, Kedia maintains that he has made fresh stock purchases over the past six months, even if these investments are currently trading at or below his buying price. He advises against attempting to time the market, emphasizing that sustained recovery hinges on corporate profit growth and improved geopolitical conditions. Kedia expects issues to begin resolving by January 2027, paving the way for a better Samvat.
For long-term investors, Kedia recommends focusing on stocks linked to emerging themes and futuristic technologies. These include companies in the energy sector, electric mobility and EVs, and businesses leveraging Artificial Intelligence (AI) to enhance efficiency. Certain infrastructure stocks also hold appeal. He urged investors to cultivate patience, suggesting a holding period of at least three to four years for these strategic bets.
Addressing FPI Outflows
Kedia attributed FPI outflows to several factors, including perceived lower growth opportunities in India and a lack of emerging technology plays compared to global alternatives. While FPIs have withdrawn from other countries too, he believes that unless India presents more attractive opportunities in emerging themes, their significant return remains uncertain. He also mentioned the long-term capital gains (LTCG) tax as a factor, though he doesn't believe its removal alone would reverse FPI trends, especially since capital gains tax is only paid on profits.