Volatility: ETMarkets Smart Talk | Volatility may linger, but double-digit returns still possible in 2025: Manish Jain

Despite global uncertainties and tariff tensions, Manish Jain, Executive Director & Head of Fund Management at Centrum Broking Ltd., remains optimistic about Indian equities delivering double-digit returns in 2025.

In this edition of ETMarkets Smart Talk, Jain explains why current market volatility is more range-bound than severe, how the Fed’s stance and rising US bond yields are impacting sentiment, and what sectors offer the most value for long-term investors.

From portfolio strategy and RBI’s rate cut outlook to sectoral plays in banks, defence, and healthcare, Jain shares a data-backed, bottom-up approach to navigating the months ahead. Edited Excerpts –

Q) Thanks for taking the time out. What is fuelling volatility on D-Street – tariff war fears still playing the spoilsport?

A) Hi. Thanks for having me today. The current volatility in the market has not really been intense. It’s been very range bound. However, what remains a cause of concern are two major global geopolitical issues.

One is the India US Tariff war situation and every time that we feel the situation is settled, something new comes up.

For instance, the 50% duty on metals, the intention of which was announced last week. The second is the Russia, Ukraine war, which again keeps going back-and-forth from bad to worse.

Earnings growth in the domestic markets are yet to play out so people are waiting on the side lines for that as well. Lastly, the hardening US bods fuel a fear that globally money may move from equities to bonds.

So why we remain constructive on the markets and do believe that there is a double digit return to be made in this calendar year, the new term volatility may persist for the next couple of months.

Q) What does rise in US Bond Yields mean for Indian markets? Historically, a rise in bond yields could trigger a rotation out of equities into bonds.
Additionally, rising US yields can lead to capital outflows from emerging markets as investors seek safer returns in US bonds. How are you reading into this?

A) US markets are at a very interesting juncture. This is the first time in many decades that the bond yields are hardening, and the US dollar is weakening at the same time. I do believe that the Fed will prioritise inflation over growth.

So given the stagflation situation and low probability of rate cut, we are in a unique situation. So, while the yields have hardened, we do not believe that the movement is going to be immediate, and the markets are going to wait for a greater clarity to emerge.

EMs should outperform DM’s in the near term, which is being reflected in the FII flows in the Indian market in the last few weeks.

Q) How are you managing volatility in your portfolio? Have you made any recent tweaks?
A) Our portfolio construction strategy continues to be bottom up, idea driven. We are overweight on NBFC, hotels, hospitals, pharma and manufacturing. Discretionary consumption is again something that we are building a position in. IT is the only space which we are avoiding.

So, our strategy remains clear, identify businesses which have a mix of value and growth and hold them from a three-year perspective.

In the recent volatility a number of good stocks have corrected significantly, and we are taking advantage of that situation.

Q) What do you make of the March quarter results from India Inc.? Any winners and losers?
A) We do believe that the pain in the Indian equities market as far as earnings growth is concerned is behind us. Q2 was clearly the worst. Q3 has been better than Q2 and Q4 has been better than Q3.

In the current quarter, not too many stocks have disappointed the street expectations, except IT.

So we do believe that Q1 FY 26 is poisoned to witness a steady double-digit earnings growth. So, in essence, we are very happy with the Q4 results.

Q) FOMC minutes indicated that further rate cuts could be data-dependent. But what about rate cuts back home? How do you see rates moving?
A) RBI, we do believe will do two rate cuts for this year. Inflation in India is at a multi-year low primarily driven by a strengthening rupee, declining crude prices and softening food inflation back home.

So this soft inflation footprint is here to stay for some time, paving the way for further RBI rate cuts, the Fed actions notwithstanding.

Q) We are seeing some activity in the IPO markets. What do you make of the companies that are getting listed – any interesting names?
A) The IPO space has been very interesting for the last couple of years primarily because this is widened the market breadth. Several news sectors have emerged for investors to play. The food tech space for example.

Renewables is another one. So, we do continue to look at the IPO space and the recently listed companies for our portfolio and that will continue to remain a focus area for the medium term.

These IPOs help the listed market reflect the true picture of what is new India, which is moving away from the conventional old economy sectors and hence needs to be looked at

Q) What about SME space, which has gathered more interest so far in 2025 as compared to mainboard IPOs? Do you see froth building in this space or an opportunity for long-term investors?
A) Where aware of the SME IPO space, but that’s an area we’ve kind of stayed away from so far, primarily because it’s not an area of expertise for us, and the sectors are still very nascent, and information flow tends to be a little opaque. So, that’s not an area which we are focusing on, or will be focusing on any time soon.

Q) Where do you find value in this market for long-term investors?
A) In the large cap space, banks definitely. Large cap banks have seen valuations come down to multi lows and more importantly, several issues like for example, deposit mobilisation, asset, quality and credit growth are now coming to an end.

So this is one area where we do see a lot of value if you have a 2-3 year investment horizon.

In the small cap, space we like consumption related sectors like for example, hotels. Hospitals are another sector which we find very interesting and a building position in.

Q) What is your call on the defence space? Many stocks witnessed a double-digit jump after geopolitical tensions between India and Pakistan last month.
A) Defence is an interesting space from a long-term perspective and will continue to find traction with the investors.

The valuations in the recent past had corrected to mouth-watering levels and we had bought at that point of time.

But at this moment, I think given the run-up that has happened. We are staying put and not adding more but continue to remain a good bet from a long-term perspective.

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