Expert view: Nifty 50 may rebound soon; don’t prioritise gold over equities, says Naveen Kulkarni of Axis Securities PMS

Expert view: Naveen Kulkarni, Chief Investment Officer at Axis Securities PMS, believes the Indian stock market has entered an oversold zone and looks set for a rebound. In an interview with Mint’s Nishant Kumar, Kulkarni said that gold is an important asset class to consider, but it shouldn’t come at the expense of equity investments. Kulkarni also shared his insights on the “Trump tariffs”, outlook on IT and pharma sectors and how one should invest in large-caps, mid-caps and small-caps. Here are edited excerpts of the interview:

What factors are driving the market down? Is the Trump tariff the biggest reason, or are there concerns over slowing growth and currency hitting new lows?

Donald Trump’s tariffs are clearly a major factor contributing to the significant decline of the Indian equity markets.

While the exact impact of the tariffs is unclear, their influence on currency stability is serious, particularly affecting returns for foreign portfolio investors.

Currency stability will be crucial for market consolidation.

India’s economy, which is characterised as a growth economy, gets a higher multiple on account of its scale and future growth prospects.

However, these tariffs could also impact global growth, subsequently affecting India’s growth.

That said, growth prospects are showing signs of gradual improvement, indicating that value in the Indian economy may soon emerge, leading to the stabilisation of the currency.

Consequently, while the current situation is challenging, it is expected to be short-lived.

The Nifty 50 is already down 13% from its peak. Should we brace for a deeper pain of 20%?

The Nifty 50 has experienced a significant 13 per cent correction, but the broader market correction has been even more considerable.

Currently, over 80 per cent of the stocks in the BSE 500 are trading below their 200-day moving average. Additionally, more than 40 per cent of these stocks have seen corrections of over 30 per cent from their peak values. As a result, the market has entered an oversold zone.

Over the past 20 years, the market has rebounded from similar technical levels, and we believe this instance will be no different.

Therefore, it is unlikely that we will see a further correction of 10 per cent from the current levels.

These conditions present a good opportunity for long-term investors to consider adding to their portfolios, as the potential for double-digit returns from these levels has significantly increased.

Should we be concerned about India’s slowing growth? Are the underlying issues deep-rooted, or is this just a cyclical slowdown?

India is a structurally growing economy, and there is no reason to be concerned about its growth prospects.

While linear growth can be challenging for any economy, the Indian economy is expected to grow faster in FY26 than in FY25.

The current slowdown is merely cyclical, and we can anticipate a rebound over the next few quarters. Therefore, there is no need to worry about the country’s structural challenges.

Do you think it is time to trim exposure to equities and buy more gold?

This is a good time to add equities to your portfolio, as there is significant panic selling in the market, allowing quality companies to be purchased at attractive valuations.

Regarding gold, it has emerged as a strong asset class to hold, now competing with the fixed-income asset class.

Globally, more institutions are preparing to invest in gold, which suggests that prices may remain stable and offer more consistent returns in the future.

Therefore, while gold is an important asset class to consider, it shouldn’t come at the expense of equity investments, which will still deliver superior returns from current levels.

How should we play the financial sector after the rate cut? What stocks do you find attractive?

Banks are currently trading at attractive valuations, and many non-banking financial companies (NBFCs) have also become affordable.

However, it is essential to focus on the quality of the franchise, particularly those with a more secure lending portfolio. Therefore, investing in high-quality financial services companies is a good strategy at this time.

In the Trump era, what should be our strategy for the IT and pharma sectors?

The IT sector is expected to perform well in the current era, but the emphasis will be on growth and the ability to deliver positive surprises. 

At this point, the potential for a significant positive outlook from the IT sector appears limited, which suggests that returns will likely align with overall market returns. 

On the other hand, the pharma sector has shown strong performance and delivered good returns in 2024. However, returns in this sector will depend heavily on individual stocks from the current levels.

If someone has ₹1 lakh to invest, how should they allocate it across large-cap, mid-cap, and small-cap stocks? What would you suggest?

Large-cap stocks provide good safety and the potential for double-digit returns in 2025. 

Meanwhile, following a significant correction over the past couple of months, small- and mid-cap stocks could offer substantial returns. 

In this segment, it is essential to focus on quality, as plenty of high-quality stocks can deliver strong returns from current levels.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.