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India’s macros strong but valuations still stretched, says Manishi RaychaudhuriThe Chief Executive Officer at Emmer Capital Partners expects market performance to be more closely aligned with earnings growth, which he estimates could be “in the early double digits to mid-teens” for FY26 and FY27.By Surabhi Upadhyay    | Nigel D'Souza   May 12, 2025, 10:56:58 AM IST (Published)3 Min ReadThe near-term setup for Indian equities is favourable as multiple macro and geopolitical factors begin to turn supportive, but rich valuations remain a key concern, according to Manishi Raychaudhuri, Chief Executive Officer at Emmer Capital Partners.

“The best part of the market now is that there are many stars which are aligning together,” Raychaudhuri said, pointing to the resumption of US–China trade talks, strong capex signals from large Asian tech firms, and easing geopolitical tensions in India. “It's actually a good time for Asian markets, and specifically for India too.”

However, despite the positive macro environment, Raychaudhuri remains cautious on valuations. “Valuation in India does not still give a lot of comfort. It is trading at about 20 times or so one year forward, which is slightly higher than the long-term average that the major indices have traded at,” he said. He believes market performance going forward will be more closely aligned with earnings growth, which he estimates could be “in the early double digits to mid-teens” for FY26 and FY27.

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Raychaudhuri highlighted the importance of stock selection in the current environment, particularly in the event of a global growth scare. “In case of a US recession, as we have seen historically, it's actually the expensive stocks that take a beating,” he said. “Much of the downdraft into the market arises from valuation decline, and not so much from earnings estimate decline.”

As for sectoral preferences, Raychaudhuri named private sector banks, consumer discretionary and industrials—including defence—as key themes. “I have long been a fan of Indian financials... private sector banks are the ones which would gain market share,” he said.

On defence and infrastructure, he noted, “This enhanced defence spending across the world is going to be a global theme... and the government spending momentum is also coming back after a brief lull during the election year.”

Also Read: Are defence stocks worth a look amid ongoing border tensions?

He struck a more cautious tone on pharma amid uncertainty around drug pricing regulation in the US. “If patented medicine prices are forced down, obviously generic prices would also have to fall. But one avenue of lowering healthcare costs in the United States is actually to focus more and more towards generic medicine,” he said, adding that Indian manufacturers may benefit in the long term depending on how policy evolvesContinue ReadingCheck out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!Tagsfund managerfund managers