First Global's Devina Mehra today cautioned that after two years of near‑flat market performance, Indian equities have historically surged between 5% and 55% the following year, with a 25% average gain.
Mehra underlines that the Sensex and Nifty’s headline multiples can be deceptive because the weightings of banks, lenders and PSU stocks have shifted over time. She advocates examining sector‑level P/E ratios, noting that most sectors trade below their historical averages and only a handful are slightly above but still well shy of past peaks.
The commentary links negative sentiment to higher probability of out‑performance, citing research that shows periods of fear often precede sharp upward moves. She warns that exiting during anxiety could cost investors, as missing the market’s top 10 days over 40 years could erase two‑thirds of cumulative returns.
Mehra stresses that a 100% equity allocation is unnecessary; investors should earmark capital that they won’t need for 7–10 years. The core takeaway is to remain invested and avoid market timing, as the upside potential outweighs the limited downside.
With sector valuations still below average and sentiment turning negative, the window for a 25% rebound appears open. Investors should monitor upcoming macro data releases and earnings seasons for further confirmation of the bullish case.