Nifty could head to 32,000 by FY29 as earnings recover, says Sohum’s Sanjay Parekh

Sanjay Parekh, Founder and CIO of Sohum Asset Managers, expects an improvement in corporate earnings to drive the Nifty higher, with the index potentially moving towards 32,000 based on his FY29 earnings estimate and a 20-times valuation multiple.

“If we take the earnings estimates at 1,200 this year because we’ll have a high base, and next year at 1,400, and now all of us will transit to FY28. We are talking of at 20 times at 28, 000. Then in 12 months from now we will look at FY29. We don’t have a visibility for FY29, but let’s just say nominal GDP growth led earnings growth with no major geopolitical risk would take 1,600 and 20 times at 32,000,” he said.

He believes the earnings recovery has been stronger than expected, with Nifty companies reporting 17% earnings growth in Q1 and around 22% growth for the 35-36 companies that have announced their Q2 results so far.

He added, “I really believe the two-year correction we are back to the same place, and one we clearly have to look ahead and earnings recovery and earnings growth is a big positive surprise. And the global headwinds are all becoming tailwinds.”

Parekh expects earnings growth to be supported by lower crude oil prices, moderating bond yields and softer inflation. He believes the market has moved past much of its two-year correction and advises investors to gradually accumulate equities on market declines rather than chase rallies.

Parekh said his portfolio is positioned well for the ongoing market recovery, with an overweight allocation to large private and public sector banks. The portfolio has exposure to ICICI Bank, Axis Bank, State Bank of India, HDFC Bank and Kotak Mahindra Bank, which together account for around 32% of the portfolio.

He remains positive on the banking sector, particularly large banks, as he expects the interest rate cycle to support net interest margins (NIMs) over the coming quarters. He also pointed to healthy loan growth and stable asset quality as factors supporting the sector’s outlook.

Parekh expects the banking sector to see a meaningful improvement in earnings in FY28, assuming interest rates decline by around 50 basis points over the next six months.

Apart from banks, the fund manager is positive on discretionary spending and the automobile sector, with investments in Maruti Suzuki and Mahindra & Mahindra. Both stocks account for around 7% of the portfolio.

He also sees opportunities in capital market-related businesses, including the National Stock Exchange (NSE) and Angel One, along with NBFCs such as Bajaj Finance and Northern Arc Capital.

Parekh is particularly positive on the capital market ecosystem, given the scope for greater retail participation and growth in the number of listed companies in India.

He said the fund bought NSE shares on the listing day and increased its exposure when the stock declined. He believes the exchange can deliver earnings growth of around 13-15%, excluding one-off gains, with the potential for better growth during favourable market conditions.

According to Parekh, rising investor participation, growth in India’s nominal GDP and an expanding number of listed companies will support the long-term opportunity for capital market businesses.

Despite the recent correction in IT stocks, Parekh remains underweight on the sector. He acknowledged that the fund’s decision to maintain a lower allocation to IT stocks during the recent recovery affected its performance.

While he sees value in some mid-sized IT companies, he believes earnings growth remains a concern and is not comfortable increasing exposure at current valuations. The fund would consider adding to its IT allocation if stocks correct to more attractive levels.

The portfolio is also underweight on FMCG stocks and neutral on pharmaceuticals. It remains positive on telecom, logistics and select capital goods companies. The fund has also maintained a neutral stance on large conglomerates, which Parekh believes offer value at current levels.

For the entire discussion, watch the accompanying video

Sanjay Parekh expects earnings recovery to drive Nifty higher; advises gradual accumulation

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