Nifty Returns To Be Higher Than Long-Term Average In Next Few Years, Says Edelweiss
The National Stock Exchange of India Ltd. (NSE) building stands in the Bandra Kurla Complex in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Nifty Returns To Be Higher Than Long-Term Average In Next Few Years, Says Edelweiss

After a decade of underperformance, Indian equities are finally set to deliver above average returns to investors in the coming “block of years”, according to Harshad Patwardhan.

“If you look at the last 3-5-10 years, returns have been lower than the long-term average,” the chief investment officer for equities at Edelweiss Asset Management Company told BloombergQuint’s Niraj Shah in an interview. “Compared to that, condition is ripe now for the medium term return to be higher than the long term average.”

These gains are likely to be front ended for small and large cap stocks, he said, looking back at historical trends.

The buoyancy in market returns, he said, is because of “happy conditions” such as a rebounding economy and low interest rates, both internationally and within the country. This will also reflect in better corporate earnings for India’s listed firms, he said.

Sectoral Views:

  • Neutral to overweight on banking and financials.
  • More positive on the sector than they were six months ago.
  • Bad loan problem is smaller than what was earlier expected.
  • Financials expected to do well as economy recovers.
  • Overweight on industrials, real estate and specialty chemicals.
  • Underweight on FMCG and pharmaceuticals.

On Budget Expectations

The Indian government is likely to reveal a limited but effective fiscal stimulus in the Union Budget for financial year 2021-22 in February, according to Patwardhan, at a time when economic growth is starting to recover.

India’s fiscal response over the Covid-19 pandemic has been relatively muted compared to emerging market peers and developed countries, even if for good reason. A number of economists have suggested that a stimulus is more effective when the country is coming out of the problem, he said, adding that the government may finally give the recovering economy a “nudge”.

“Within limits we might be surprised in the positive with a fiscal stimulus.”

On the other hand he does not expect any changes on the taxation front.

Watch the full conversation here:

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