Money is chasing Indian equities again. After foreign portfolio investors logged 18% dollar-denominated returns in a single month—powered by a 14% to 15% surge in the Nifty and a 3% rupee appreciation—market leadership is broadening beyond a tight circle of heavyweights.
Rupen Rajguru, Head of Equity Investments and Strategy at Julius Baer India, believes the current market expansion has considerable runway left. The driver is not mere momentum. Cash flows are accelerating. Corporate bottom lines are expanding at a pace that forces institutional desks to revise annual growth targets upward.
"The rally over the last month has once again proved that you have to be invested in the market," Rajguru said, cautioning portfolio managers against sitting in cash. Missing the sudden turn proved costly for sidelined capital.
Second-quarter corporate scorecards dismantled early-year skepticism. Aggregate earnings growth crossed 20% among companies that posted results, while operating cash flows surged at an identical 20% clip.
Crucially, breadth replaced concentration. Barring one or two lagging segments, virtually every sector delivered double-digit bottom-line growth. Forty-five percent of listed companies beat consensus earnings estimates outright.
| Macro & Corporate Indicator | Previous Benchmark | Julius Baer Current Assessment |
|---|---|---|
| FY Earnings Growth Forecast | 14% – 15% | 18% – 20% |
| Q2 Aggregate Earnings Growth | — | >20% YoY |
| Q2 Operating Cash Flow Growth | — | >20% YoY |
| Monthly Nifty Index Advance | — | 14% – 15% |
|---|---|---|
| Monthly Rupee Appreciation | — | ~3% |
| Dollar-Adjusted FPI Gain | — | ~18% |
| Baseline Nominal GDP Growth | — | 10% – 11% |
At the start of the financial year, consensus projections pegged full-year earnings growth at 14% to 15%. Rajguru now sees those numbers pushing closer to 18% to 20%. Historical seasonality supports the revision—corporate India typically generates stronger revenues and operating margins in the second half of the fiscal year than in the first.
Market Context: The rally marks an abrupt structural reversal. Just a month earlier, global fund managers held India as an under-owned and relatively undervalued allocation. Shifting macroeconomic currents in the United States following the Democratic election victory, paired with cooling institutional appetite for the artificial intelligence trade, diverted institutional capital back into domestic equities.
Rajguru anchors the medium-term market trajectory to macroeconomic fundamentals. Baseline nominal GDP expands between 10% and 11%, while listed corporate balance sheets outpace the broader economy to trend around 12% to 13% annual growth.
Yet the Nifty could beat that baseline over the coming two to three years. The reason is simple: mean reversion. The headline index generated flat or negative returns over the preceding two-year cycle, leaving substantial room for an aggressive catch-up phase that could add several percentage points to trendline equity performance.
Corrections will still bite. A market capable of surging 15% in thirty days remains equally vulnerable to swift pullbacks of 5% to 8% on negative shocks. But trying to dance around every dip risks getting locked out of sustained compounding.
Beyond macro benchmarks, tactical sector shifts are accelerating around softening crude oil prices. Lower input costs directly protect operating margins across aviation counters, fuel retailers, and consumer-facing manufacturers.
Cement offers an asymmetric entry point. The sector lagged the broader indices despite logging solid double-digit dispatch volume growth in the second quarter. The bottleneck was expenses. Elevated input costs flattened operating EBITDA, choking volumes from translating into distributable net income.
Softening fuel prices combined with planned cement price hikes will repair those profit margins. Within the manufacturing space, Julius Baer points directly toward southern producers, where regional price dynamics and cost relief offer superior risk-reward profiles as balance sheets digest the next cycle of capital expenditure.