In this edition of ETMarkets Smart Talk, Vaibhav Sanghavi, CEO of ASK Hedge Solutions, says the markets are now positioned at a crucial inflection point after nearly 18 months of consolidation and valuation reset.
Backed by stronger corporate earnings, robust economic growth, and improving global conditions, Sanghavi believes the next 24–36 months could deliver returns of 40–50%, provided the current tailwinds hold steady.
In a wide-ranging conversation, he breaks down the earnings cycle, FPI trends, sector leadership for 2026, and why disciplined asset allocation remains the biggest lesson from 2025. Edited Excerpts –
Q) What better way to start December, the last month of the year? We have already hit fresh record highs in November. Where are we headed?
A) The momentum of the market is a result of better corporate earnings, robust commentaries and buoyant GDP growth estimates.
After about a year and a half of consolidation, wherein the valuations have corrected, and growth is catching up, markets are at an inflexion point for the next 24 to 36 months.
We have numerous potential variables which can provide tailwinds to both the economy and the markets. With consensus earnings likely to grow around 15% each for the coming two years and some potential rerating on the higher side, markets have the potential to deliver 40–50% over the next 36 months.
Q) Nifty rose by over 10% so far in 2025 to hit fresh record highs. However, individual portfolios are still not celebrating?
A) We have consistently mentioned that if the investments are made at elevated valuations, then the gestation period to accrue the desired returns gets elongated.
Most of the portfolios have adequate exposure to the mid and small cap, where in our view, valuations were expensive.It is nothing more than growth catching up to those valuations, leading to a period of consolidation.
As the economy keeps up with the growth rates, we may see portfolios coming back in green.
Q) How are we placed from a valuation standpoint?
A) Valuations on the large caps seem to be reasonable and within the longer-term bands. However, we do think that mid and small caps are still richer, and opportunities in this space have to be a lot bottom-up driven.
Q) FIIs were busy pulling out money from the secondary market while DIIs/retail investors were opening taps of SIPs. What could be the big trend in 2026?
A) From an FPI perspective, the larger theme was the AI opportunity in 2025. And within emerging markets, China, Korea and Taiwan offered the same with much cheaper valuations.
We thus witnessed reallocation from India towards these countries. Also, when comparing the potential return on a post-tax basis, other countries offered a better opportunity to generate returns. We thus saw FPIs pulling money out of the secondary market.
For 2026, we do expect this trend to reverse. As our earnings grow, with valuations coming back in the longer-term average band, the Fed decreasing interest rates and potential discomfort on AI theme valuations, we can expect FPIs to come back.
In summary, FPIs, or any investor, invest for post-tax returns, and if the variables support it, it’s a foregone conclusion that we will see FPI investments revive in 2026.
Q) How is the IPO theme likely to play out in 2026? Any big names you are watching out for? FIIs have been steady buyers in the primary market space?
A) Primary markets give investors the option to own new, high-quality businesses at better valuations. Thus, the excitement around IPOs is likely to continue in the coming year as well. We expect FPI participation to continue in the IPO segment in 2026.
Q) Which sectors or themes are likely to lead a rally in 2026?
A) Consumption (discretionary, new age tech platforms, retail, staples, etc.), Industrials and Private Banks are likely to lead the rally in 2026.
Q) What are your big learnings from the year 2025?
A) Reiterating the importance of maintaining discipline in asset allocation, along with respect for valuations, consistently helps generate better Risk-Adjusted Returns.
Q) With equity hitting fresh record highs, do you see a rub-off effect on Gold this time around?
A) I have a slightly different view here, where I believe gold prices after this fantastic rally may enter a consolidation phase.
Gold prices have been beneficiary of not only global prices but also INR depreciation. In our view both are nearing its end of run in the short term. The timing is difficult, but trade deals of the US, China and US, India can trigger the consolidation.
Disclaimer: “The views stated here are personal in nature.”
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
