Markets needed this whole correction, now poised for structural upside, says Vikas Khemani

With a host of key triggers set to unfold in the coming weeks, the Indian equity markets appear poised for a structural upside, believes Vikas Khemani, founder of Carnelian Asset Advisors. In an interaction with ET Now, Khemani emphasized how this correction was much needed and how we can now prepare for a structural market upswing.

He outlined the critical factors that are expected to shape investor sentiment and drive market direction in the near term.

According to Khemani, the next month will bring much-needed clarity across several dimensions — including tariffs, corporate earnings, RBI’s policy direction, and SEBI’s regulatory stance.

“Yes, uncertainty goes down,” he said, adding that a lot of the excessive valuations have already been corrected and earnings expectations have been pushed forward, making valuations appear more reasonable.

He emphasized that a “decisive rally in the markets would happen once the environment for the interest rate cut happens in US”. While the timing of the Fed’s rate cut remains uncertain, Khemani remarked that it is inevitable, whether it materializes in three, six, or twelve months, depending on macroeconomic outcomes like inflation and tariff adjustments.

If tariffs are implemented in a moderate or sensible way, he added, the rate cut could come sooner rather than later.On the domestic front, Khemani asserted, “Markets have bottomed out, most of the damage is done.” While acknowledging sector-specific weaknesses, he remained optimistic about overall corporate performance, stating: “Structurally speaking we would have 14-15% kind of earning growth next year which is fairly decent.”Valuation-wise, he believes that the market is in a comfortable zone. A potential Fed rate cut could serve as a major trigger for renewed foreign flows into Indian equities.

“If the expectation of the Fed rate cuts happens, then you will start seeing decisively money flow moving from the foreigners towards emerging market because that always happens,” he said.

Backing his bullish view, Khemani also pointed to a string of recent positive developments.

“RBI had a policy pivot, interest rates coming down, liquidity squeeze getting eased up, risk weightage for the NBFC went down. RBI has given very-very dovish growth-focused commentary many times over. Government has done this whole tax break, February IIP numbers were good, electricity consumption was good, tax collections were good,” he noted.

Also read: Market cycles are changing: Is quality the new momentum?

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)