Stock Pickers’ Market? This Market Veteran Warns ‘Tough Year Ahead’

While many believe in seeing the world for what it could be, Dhiraj Agarwal, managing director of Ambit Investment Managers, is on the other side in the ‘it is what it is’ camp. As the first quarter earnings seasons wrap up, many market voices have called it mixed, but Agarwal brings it down to the numbers that are not looking too good.

Weak Earnings Growth: A Cause for Concern

Agarwal pointed out that the message is clear in the numbers and the data is not as ‘mixed’ as some might hope. ‘The data is downbeat, we want to see them as mixed. Nifty 50 earnings growth for this quarter is 4% and broader market growth is at 6% or 6.5%, which is at a three-year low. The consumption revival is not showing up on the numbers yet,’ he said.

There is a positive pinch of salt and strong reasons to back it, he acknowledges, as the tax rebate and interest rate cut is showing some demand build. Noting that this needs to be watched, the numbers are weak compared to the last quarter, according to the expert.

A Focused Domestic Approach: The Way Forward

He also stressed the need for a focused domestic approach, highlighting that even before the current trade war and the tariffs started, the economy had been showing signs of a slowdown and earnings had also shown signs of slipping, which was purely domestic.

‘Consumption is not picking up, job creation has not happened and capex has slowed down, that needs to be addressed. Whatever is happening to global trade has only one implication. Global trade and export will slow down. So I think financial year 2026 could be tough, a lot needs to be done domestically as well,’ he noted.

High Polarisation in the Market: What to Expect

Looking ahead, Agarwal described the next two to three years as a period of high polarisation in the market.

‘The next two or three years will be years of high polarisation. There are two phases for the markets to go through. One is where earnings growth is in abundance, and the other is where it is scarce. So it is time for bottom-up stock picking, rather than broad brushed sector calls,’ he warns.

Expecting this trend to not change for the next two or three years, Agarwal said it is going to be a tough market and a stock pickers market.

No Downward Bias in the Near Term

‘I see no downward bias in the near time, the reason for that is the market has digested all the negative news. Our 50% tariff is already in the price,’ he observed. Coming to any positive pinch of salt that the expert sees are the domestic and global cues.

‘Where we could see some positive surprise in the next few months is if the festive demand is better than expected, and if the tariff comes down,’ he said.

Slowing Global Trade: Implications for India

From a medium-term perspective, Agarwal made it clear that the slowing global trade will have direct implications, making FY26 potentially tough.

‘What is happening globally is affecting us, but we shouldn’t take our eyes off of what is happening domestically. We may not be able to control what the US government might be doing, but we can negotiate and put our best foot forward and get the best possible deal,’ said Agarwal.

As an investor, it’s essential to stay informed and adapt to the changing market dynamics. With the Indian stock market expected to be highly polarised, it’s crucial to focus on stock picking rather than broad sector calls.

Conclusion

In conclusion, Dhiraj Agarwal’s warnings of a tough year ahead for Indian investors should not be taken lightly. With weak earnings growth, a slowdown in consumption, and high polarisation in the market, it’s essential to be cautious and adapt to the changing market dynamics. By focusing on domestic cues, keeping an eye on global trade, and being prepared for a stock pickers market, investors can navigate the challenges ahead and make informed investment decisions.