It’s been a rather tumultuous 2025 for the markets so far. The Nifty and the Sensex are down 5% each for the year and the Nifty’s market cap declined a whopping 15% from its peak. The question that’s on everyone’s mind is what’s the right strategy now? In an exclusive conversation with FinancialExpress.com, Manish Sonthalia, Director and CIO of Emkay Investment Managers says the “euphoria is now gone and the markets are back to where the fundamental values should be.”
5 takeaways from Manish Sonthalia’s perspective on the markets now
Here are the key highlights from the insightful conversation with Manish Sonthalia on markets, FII selling, rupee’s trajectory and the state of the economy.
#Nifty to surge 12% in 1 year
Sonthalia is quite categorical in that Nifty around 22,000 levels is quite stable and he is not bearish at these at all. Charting out targets for the benchmark Index, he pointed out that “Market should gradually move up. We are not going to see a V-shaped recovery. It’s going to be gradual, U-shaped. After 22,000, I think by December or March 2026, we should be closer to 25,000. Long-term, India’s target is 15% compounded, and should probably be around 26,000, -27,500 by the end of 2027.”
#Buy mid and small caps but look at valuations
The big worry point for the markets – small and midcaps. Given the sharp selloff, how should one approach them? Sonthalia recommends going company specific. According to him, the “Only thing is one should be careful about is individual company valuation. If the Nifty is trading at 20x PE and earnings growth is 10%, it is trading at 2 PEG (price/earnings-to-growth). Buy any stock in this market, mid cap, small cap, large cap within that band of 2 PEG. Don’t bet on excessive. Don’t buy stocks that have 3 PEG valuations and above.”
#FII selling not a big worry
Addressing the big elephant in the room- when will FII selling stop, given they have already sold equities worth Rs 3 lakh crore in 5 months. Sonthalia says, “I don’t read too much into their selling. One more statistic to look at will be they have been selling secondary markets but they have been buying primary.” According to him, they will spread out their allocations globally but long-term they are positive on India. “FIIs that we speak to say the long-term structural story of India is intact. They have been saying this for 2 decades. But at all points of time they find India expensive, We can’t change their point of view,” added the CIO of Emkay Investment Managers.
#Rupee to slip to 90/$ level
Speaking on the rupee’s depreciation, Sonthalia pointed out that all emerging market currencies have become weak as the dollar gained strength after Trump took charge in US. Broadly, he believes that it could slip a little more, “you should see another 3-4% depreciation. We should see the rupee closer to 90/$. In that backdrop, export oriented sectors are likely to do well. And this whole euphoria narrative around the adverse impact of reciprocal tariff is again, overplayed.”
#State of economy: Capitalise on demographic dividend
Speaking on the state of the economy he sees India’s growth story rising to new highs in the next 10 years. “This March 31st it will be $4 trillion, next six years it will be $8 trillion, and in the ensuing six years it will be $16 trillion economy. So it will be 4x in the next 10-12 years. At 6-6.5%, it’s going to be the highest growth rate countries in the world. And because we are more domestic centric, we are ring fenced.”
According to Sonthalia the only way to maintain the growth trajectory in India is by maintaining “focus on the “employability of our youth.” This is what will determine “whether we are sitting on a demographic dividend or a demographic timebomb,” he concluded.
