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Informist, Thursday, May 21, 2026

MUMBAI – Indian equity markets are fairly valued amid the volatility caused by the West Asia war and the Nifty 50 is expected to provide double digit returns in one year, investment advisory firm smallcase said in a Webinar Thursday. They are also optimistic that the small-cap indices and mid-cap indices would outperform its benchmark peers in 2026. They expect the power and banking sectors to outperform in 2026-27 (Apr-Mar). 

The Nifty 50 is currently around 3.2 times based on its price-to-book ratio, which is within the 3.0-3.5 times expectation range, said Ashwini Shami, president and chief portfolio manager at OmniScience Capital. On the price-to-earnings front, Shami said that the Nifty 50 is around 20-22 range. "Last 10 years if you look at obviously Nifty has averaged around 25 multiple. But currently at somewhere around 20. We are definitely not overvalued territory," Shami said.

Anuj Jain, co-founder of Green Portfolio, is of the view that the valuations for the Indian markets are not stretched. He said that the current valuations for the Nifty 50 are lucrative. Jain said that investors should focus more on the balance sheet of the companies, where they are actually investing rather than on the product or macro picture. The volatility caused by the West Asia war was priced in but better than expected March quarter earnings are providing some support to the equity markets, said Sneha Jain, founder and chief executive officer, WealthTrust Capital Services.

While Sneha Jain believes that small-cap companies are expected to perform well, she advises investors to maintain a cautious stance while taking sectoral bets. Going forward, she expects discretionary spending to be impacted when companies start passing on higher input costs due to West Asia war to customers. 

In FY27, the power sector is expected to outperform, led by higher demand on the back of increased spending on artificial intelligence and urbanisation, Sneha said. "We are expecting the consumption to nearly triple from 1.6 trillion units. We are expecting it to go to up to somewhere around 4 trillion units by 2035," she said. To achieve this an estimated capital expenditure of around INR 65 trillion is required and a significant portion of this will go to the renewable energy space, she added.

The banking and financial sector are looking attractive, especially public sector banks, Shami said. Last year, earnings growth of financial services companies were not very impressive as compared to other sectors. This was primarily due to a slowdown in loan growth to around 9% in 2025. "But last quarter and like starting from January we have seen a significant uptick and last month we have seen loan growth touching around 16% rate which is highest in let's say 2 years time frame," Shami said. 

Meanwhile, airline companies are expected to see pressure on margins due to high crude oil prices. Fertiliser companies are also expected to feel the heat of this because a lot of India's fertiliser raw material comes from West Asia, according to Sneha Jain. She remains cautious on the overall IT sector, while select mid-cap stocks as seen attractive. "We are seeing some AI revenue coming from IT. But yet a cautious note because it's not all looking so good completely," she said. 

The large-cap companies underperformed in FY26 despite a huge inflow of mutual funds, according to Anuj Jain. Around INR 3 trillion was infused by mutal funds into the Indian equity markets. "This mostly goes into large caps and higher side of mid-cap stories," Jain said. "So basically in large cap as well, even though there was huge inflow of mutual funds money,... deployment was very selective," he added. For FY27 he expects domestic sectors such as capital goods, defence, non-stationary fast-moving consumer goods companies to perform well.  End

Reported by Adhithya Aji and Arya S. Biju

Edited by Akul Nishant Akhoury

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