Similar question, because yes, the index is up one day, down the next, and there’s a lot of sector churning underway. That’s one of the clear trends we’re picking up. Earnings disappointments are getting hammered in a big way, while in some of the other beaten-down sectors—autos being a case in point—they’re trying to make a comeback. What’s your reading on the markets right now?
Nikhil Ranka: Broadly, about a month back when we were on the show, we were a bit cautious on the markets around the 25,600–25,700 levels. At that point, we clearly highlighted that the best-case scenario for the markets was time consolidation, because the incremental upside based on FY27 valuations pointed more towards 26,200 as the fair value for the Nifty. We have corrected almost 1,000 points from those levels, and the good part is that now we at least have closer to an 8–9% upside from our fair value of 26,200.
If we look at individual sectors—specifically IT—most large-cap names are now trading at less than 20 times FY27 earnings. These are the levels they had hit when tariff uncertainty was at its peak, so incremental downside from here seems limited for IT names.
Similarly, in the banking sector, the street has largely factored in that Q2 will see another 10–15 bps NIM decline, given Q1 had a 10–12 bps decline. Most large banks have indicated that the first rate cut has been fully passed on, and the second rate cut of 20 bps will be passed on in Q2, leading to further NIM pressure. So Q2 should be a soft quarter from an earnings perspective. But from Q3 onwards, we expect earnings to pick up, and markets should also start trending higher from these levels. Overall, we don’t see the markets falling below 24,200 in the near term.
What kind of push do you think the upcoming festive season, the wedding season, and, in the near term, this long weekend could give to quick commerce, hospitality, travel, and tourism? Where do you see these sectors heading on the back of a strong festive period ahead?
Nikhil Ranka: On the aviation side, Q2 is typically one of the softest quarters. Historically, there’s been a significant quarter-on-quarter yield decline in Q2 compared to Q1. Based on that, IndiGo should post softer Q2 numbers. The only positive is that there’s a meeting between Mr. Trump and Mr. Putin on the 15th of August, and if some solution emerges, the uncertainty over disruptions or sanctions on Russia would go away. If crude prices were to fall by $4–5 from current levels, that would benefit some aviation companies.
On the two-wheeler side, we’ve seen single-digit volume growth for most players over the last two to three years, and given current trends, we expect that to continue into FY26. However, there should be some margin expansion as steel prices have cooled off. Stocks have also corrected from their peak valuations. On an FY27 basis, for example, Hero MotoCorp is trading around 17–18 times earnings, and Bajaj Auto is closer to 22 times. That leaves scope for another 10–15% upside in these names, but beyond that, it will be difficult to build a strong case given that we still expect only single-digit volume growth for most two-wheeler players in FY26.
