No runaway rally likely; markets to trade in broad range: Sameer Dalal

The recent volatility in equity markets reflects a mix of improving global sentiment and lingering domestic uncertainties, according to Sameer Dalal from Natverlal & Sons Stockbrokers, who expects the near-term environment to remain uneven rather than trending strongly upward. He noted that while optimism around global developments such as a near-finalised geopolitical agreement has supported sentiment, it has not been enough to offset macro pressures weighing on earnings and margins.

Dalal pointed out that elevated crude prices over an extended period continue to filter through the economy in indirect ways. Even companies not directly linked to fuel retail are facing cost pressures as petroleum derivatives are used as key inputs. This, he said, is either compressing margins or forcing price increases that could eventually weigh on consumption demand. As a result, he expects the first half of the year to remain weak on earnings, with Q1 and Q2 likely under pressure.

He further cautioned that global oil trends are only one part of the inflation picture, with domestic monsoon conditions emerging as another critical variable. A weak or delayed monsoon, he said, could push food inflation higher, potentially forcing the RBI into a tighter monetary stance. Given these overlapping uncertainties, Dalal believes markets are unlikely to sustain a one-way rally and instead may remain rangebound, with Nifty oscillating between 23,000 and 24,500 over the next several months.

On portfolio strategy, Dalal emphasised a diversified approach with a strong tilt toward structural growth themes. He sees the power sector as a long-term beneficiary of electrification, rising data centre demand and reduced reliance on fossil fuels, suggesting an allocation of around 10% to 15%. Consumption, despite short-term softness, remains a core structural theme in his view, given India’s low per capita income and long runway for demand growth.

He is also constructive on financials, which he believes should form a significant portion of portfolios, as credit growth is closely tied to India’s capex cycle. Banking and financial services, he suggested, could account for 20% to 25% of allocations, supported by improving lending growth trends and structural demand for credit in the economy.

Within the banking space, Dalal maintains a clear preference for private sector lenders over PSU banks. While acknowledging the appeal of public sector banks, he highlighted risks arising from policy intervention during stress periods, particularly in agriculture-linked credit cycles. Private banks, in contrast, operate with more independent risk frameworks and stronger control over balance sheets. He highlighted HDFC Bank as a key large-cap preference, citing potential margin expansion and franchise strength. Among mid-tier names, he remains positive on IndusInd Bank, noting that concerns have largely been priced in and exposure risks have moderated. He also sees opportunity in IDFC First Bank, while suggesting selective exposure to financial plays linked to infrastructure and power financing.

He further highlighted opportunities in NBFCs and infrastructure lenders such as Power Finance Corporation and REC, where strong exposure to government-linked lending and improving demand outlook could support steady growth. He also mentioned Sammaan Capital and Shriram Finance as beneficiaries of strong capital positions, which could enable multi-year growth without the need for frequent equity dilution.On Sammaan Capital, Dalal expressed caution on near-term return ratios, particularly the ambitious 3%–4% ROA guidance, calling it aggressive given rising operating costs associated with business diversification into new lending segments. However, he acknowledged that significant past write-offs could potentially support future profitability through write-backs, while improving credit ratings could lower funding costs and enhance spreads over time. He also noted that a shift toward higher-yielding loan segments such as gold and personal loans could support earnings, although he expects the full benefits to play out gradually rather than immediately.

Overall, Dalal’s view is that while structural growth drivers in India remain intact, the market is currently navigating a complex mix of inflation risks, weather uncertainty and global commodity trends. This, he believes, makes a strong breakout unlikely in the near term, with a more stable earnings-driven phase likely to emerge only as visibility improves into FY28.