India’s benchmark indices — Nifty 50 and Sensex — have gained nearly 8–9% in 2025 so far, but further re-rating potential appears limited, according to Axis Securities’ monthly market outlook report.
The brokerage emphasized that sector rotation and stock selection will be key to outperforming in the coming quarters, as broader market earnings remain stable and investors await potential upgrades from Q3 FY26 onward.
“In our base case, we revise our March 2026 Nifty target to 25,500, valuing it at 20x FY27 earnings. We see upside risks as earnings momentum improves,” the report said.
📉 India VIX: Market Calm but Watch for Short-Term Swings
The India VIX, a measure of expected volatility, is currently below its long-term average, suggesting that markets are in a neutral zone — neither in panic nor euphoria.
Axis Securities expects short-term volatility but maintains a positive medium- to long-term outlook.
“Investors should maintain 10–15% liquidity to buy on dips in high-quality companies with strong earnings visibility over a 12–18 month horizon,” it advised.
📊 BEER Ratio: Bonds vs Equities
The Bond-Equity Earnings Yield Ratio (BEER), which compares the 10-year government bond yield to equity earnings yield, currently stands at 1.3, slightly above its long-term average of 1.2.
This implies that equities are moderately expensive relative to bonds, though still within a reasonable valuation band.
Indian bond yields have softened by 30 basis points since November 2024, driven by the US Fed’s rate cuts, fiscal consolidation, and expectations of RBI easing.
“After recent equity corrections, the BEER ratio now trades slightly above its long-term average,” Axis Securities noted, indicating a balanced but cautious phase for investors.
💰 Buffett Indicator: Market Still Above Fair Value
The Buffett Indicator, which measures a country’s total market capitalization-to-GDP, currently stands at 138% for India — above its long-term average but expected to normalize to 125% in FY26 as GDP expands.
India’s nominal FY25 GDP was pegged at ₹324 lakh crore, and the FY26 projection under the Union Budget estimates ₹356.97 lakh crore.
“With earnings momentum building, we could see the MCap-to-GDP ratio remain elevated in the coming quarters,” Axis said, comparing the trend to FY10’s post-GFC recovery, when valuations soared alongside earnings.
🧩 Valuations & Earnings Outlook
While the market may see consolidation after a strong run, analysts believe India’s structural growth story remains intact.
Corporate earnings, government-led capex, and improving consumption trends could sustain market buoyancy into 2026.
However, economists at Nomura and BofA Securities cautioned that slower income growth, soft labor markets, and moderating wealth effects could temper near-term sentiment.
📈 Investment View
Axis Securities’ strategy for investors:
- Maintain liquidity (10–15%) to buy on corrections.
- Focus on quality stocks with high earnings visibility.
- Rotate sectors to capture alpha opportunities.
- Hold a 12–18 month horizon for meaningful gains.
💡 Bottom Line
The key market metrics — BEER ratio, Buffett Indicator, and India VIX — collectively suggest that India’s market is fairly valued but not overheated.
While short-term volatility may persist, long-term investors could benefit by buying quality on dips, as earnings upgrades and GDP growth continue to drive India’s equity story.
Originally published on newsworldstime.com.
Originally published on 24×7-news.com.
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