He expects the index to remain range-bound, with 24,000 levels providing reasonable support, while foreign flows and strong primary-market activity could limit the pace of gains.
“The market will remain range-bound in my view, but the range has definitely shifted after these earnings,” Jauhar said. He expects the Nifty to continue moving higher with earnings, although the rise is likely to be a slow grind rather than a broad-based rally.
The improvement in earnings has been significant. For the first time in two to three years, investors are gaining confidence that large-cap companies can deliver double-digit earnings growth. Around 75% of Axis Capital’s coverage universe either beat or met earnings expectations, showing that the recovery is broad-based.
Jauhar sees domestic consumption as one of the strongest themes. Staples have reported their best revenue growth in two years, while discretionary businesses, paints, quick-service restaurants, new-age companies, hotels and real estate are also seeing stronger demand.
Urban and premium consumption continues to grow faster, but rural and mass-market demand is no longer a major drag. This makes the overall consumption trend more supportive for the market.
Real estate is another area where Jauhar remains positive. Housing absorption in the top seven cities has grown around 11% year-on-year, although new launches are still down 17%. He expects the slowdown in launches to ease, while strong absorption should support both real estate and cement demand. Cement, in particular, could see improvement after the monsoon season.
Foreign investor flows have also improved, with India seeing two consecutive months of positive flows. However, Jauhar said this does not yet represent a full-fledged return of foreign buying. A significant portion of the money is also going into primary-market fundraises, creating competition for secondary-market stocks.
In August, around 40% of foreign capital flowing into India went towards primary markets, compared with more than 50% in the previous month. This could limit the pace of the Nifty’s rise even as earnings improve.
Foreign investors are also not yet making India their top choice within Asia. Sovereign funds have started buying Indian equities and emerging-market and global funds have moved closer to neutral on India, but Asia-focused funds remain underweight.
“North Asia continues to have everyone’s eyeballs for now,” Jauhar said, pointing to continued investor interest in markets such as Korea and Taiwan.
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As a result, Jauhar expects India’s market recovery to remain earnings-driven rather than valuation-driven. He sees some gradual compression in Nifty price-to-earnings multiples over the next year to year and a half, while stronger earnings should continue to push the index higher in absolute terms.
“It’s not going to be a re-rating kind of a rally in India,” he said. “It will be, at least on the large caps, an earnings-linked slow grind up.”
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