Klay Group anticipates a market rebound as Indian equities show signs of stabilization, offering investors a strategic opportunity amid the recent downturn. Indian equities are experiencing their longest losing streak in over two decades, with five consecutive months of negative returns—a pattern last seen in 2001. The Nifty Smallcap 100 and Midcap 100 have fallen 22% and 16% YTD, while the broader Nifty 50 is down 15% from its September 2024 peak. Relentless foreign portfolio investor (FPI) selling, totalling $35 billion in outflows, has weighed heavily on sentiment, while domestic investors have pulled back, leading to a rare decline in retail-driven inflows.
Yet, some market watchers believe the tide is about to turn. With valuations normalizing, selling pressure easing, and corporate earnings stabilizing, analysts suggest Indian equities may be nearing a bottom—setting the stage for a potential market rebound.
"As we see a reversal is on the horizon, we expect markets to pull back in near term making a temporary bottom," said Ravi Malani, Head of Investments & Equities at Klay Group. "Markets tend to recover before sentiment shifts, and we see compelling opportunities for investors willing to take a strategic, long-term view.”
According to Ravi, multiple factors signal that Indian equities may soon find a floor. FPI selling is expected to slow, as global investors begin rotating away from overheated U.S. and Chinese markets. The balance of power in Indian equities has also shifted, with domestic investors now holding 32% of the market—while FPI ownership has dropped to a 12-year low of just 16%.
Adding to this, India's economic resilience remains strong, with exports to the U.S. accounting for only 2% of GDP—one of the lowest among emerging markets. With Q4 FY25 earnings projected to improve and potential government and RBI policy measures on the horizon, Klay Group expects sentiment to stabilize in the coming months.
"India’s economic fundamentals remain intact. The financialization of household savings, the rise of retail investors, and improving fiscal conditions all point to a market that is maturing beyond FPI dominance," Ravi added. "Investors who take advantage of this pullback will likely see strong returns over the next two years.”
With the Nifty now trading at fair valuations and market pressures expected to ease, Klay Group believes that long-term investors have an opportunity to step in before sentiment turns.
Data Source: Bloomberg
For more information about Klay and our services, please visit www.Klaygroup.com.
For any additional inputs or views, you may connect at [email protected].
Yet, some market watchers believe the tide is about to turn. With valuations normalizing, selling pressure easing, and corporate earnings stabilizing, analysts suggest Indian equities may be nearing a bottom—setting the stage for a potential market rebound.
"As we see a reversal is on the horizon, we expect markets to pull back in near term making a temporary bottom," said Ravi Malani, Head of Investments & Equities at Klay Group. "Markets tend to recover before sentiment shifts, and we see compelling opportunities for investors willing to take a strategic, long-term view.”
According to Ravi, multiple factors signal that Indian equities may soon find a floor. FPI selling is expected to slow, as global investors begin rotating away from overheated U.S. and Chinese markets. The balance of power in Indian equities has also shifted, with domestic investors now holding 32% of the market—while FPI ownership has dropped to a 12-year low of just 16%.
Adding to this, India's economic resilience remains strong, with exports to the U.S. accounting for only 2% of GDP—one of the lowest among emerging markets. With Q4 FY25 earnings projected to improve and potential government and RBI policy measures on the horizon, Klay Group expects sentiment to stabilize in the coming months.
"India’s economic fundamentals remain intact. The financialization of household savings, the rise of retail investors, and improving fiscal conditions all point to a market that is maturing beyond FPI dominance," Ravi added. "Investors who take advantage of this pullback will likely see strong returns over the next two years.”
With the Nifty now trading at fair valuations and market pressures expected to ease, Klay Group believes that long-term investors have an opportunity to step in before sentiment turns.
Data Source: Bloomberg
For more information about Klay and our services, please visit www.Klaygroup.com.
For any additional inputs or views, you may connect at [email protected].
