Veteran investor Sunil Singhania, founder of Abakkus Asset Manager, has characterized the recent stagnation in Indian equities as a necessary 'time correction' rather than a worrying price collapse. He suggests that India could become a destination for foreign capital if the current, narrowly-driven artificial intelligence (AI) trade in other global markets loses momentum.
A Consolidation Phase, Not a Crash
Singhania pointed out that even in a challenging year marked by geopolitical tensions and trade delays, the Nifty has delivered 7-8% returns. He emphasized that systematic investment plan (SIP) flows remain robust, indicating sustained domestic investor confidence. "This phase has been more of a time correction than a price correction," Singhania stated, expressing greater optimism for the years 2026 and 2027 as India's economic recovery gains pace.
He contrasted India's performance with markets like South Korea, which have posted spectacular gains of 60-70% in 2025. Singhania noted that these surges represent a catch-up after years of flat returns and are driven by just a handful of technology and AI stocks. "Such markets are vulnerable if the AI trade loses steam," he cautioned, highlighting that India's more broad-based market, after a strong run between 2020 and 2024, is now in a healthier consolidation phase.
Valuations and the Earnings Imperative
On valuations, Singhania provided a nuanced view. The premium of Indian equities over emerging markets has narrowed from 45% in 2024 to about 15% currently, which is in line with the 10-year average. Trading at around 18 times earnings, he described the market as neither cheap nor exorbitantly expensive.
"Corporate profit growth is key," he asserted. For India's valuation to look comfortable, profit growth needs to accelerate to at least 14-15%. He noted that growth has improved from 3% in September 2024 to 10% by December 2025. With GDP growth expected at 6.5-7%, Singhania realistically expects large-cap earnings to grow by 12-13% and mid-caps by 14-16% on a compounded annual basis over the next few years.
Sectoral Preferences and Investor Advice
Singhania outlined where his firm finds comfort and where it sees risks:
- Positive on: Financials (both banks and NBFCs), non-fund financials like asset management and insurance, pharmaceuticals, select engineering companies, and nonferrous metals.
- Avoiding: Sectors or companies with no profits, constant cash burn, or extreme valuations disconnected from growth, such as some new-age platforms or slow-growth consumer staples trading at 50-60 times earnings.
For investors resetting their portfolios, his advice was clear: focus on long-term wealth creation and avoid being hassled by near-term news. He expects positive triggers from a growth-oriented budget and the lagged benefits of GST cuts to reflect in corporate results. "India has the potential to deliver low-to-mid teen returns," he added.
On the delayed trade deal with the US, which has impacted export-oriented companies, Singhania remains optimistic, believing the 50% tariffs are not a permanent feature for India. His biggest current concerns are the prolonged tariff resolution timeline and the relentless supply of new paper (IPOs and fundraises), which diverts capital from existing listed companies.
Singhania also revealed a subtle shift in his investment approach, acknowledging the changing economy. His value-conscious firm, which typically invests only in profitable companies with high returns on capital, has started tracking some sensible new-age companies, potentially marking a cautious evolution in strategy for the veteran investor.
