In this edition of ETMarkets Smart Talk, Sanjay Kumar, Chief Investment Officer at PNB MetLife, shares his outlook on the Indian market as the second half of 2025 kicks off amid global volatility and persistent FII outflows.
Despite the choppiness in foreign investor flows, Kumar remains optimistic about India’s long-term growth narrative, supported by macroeconomic resilience, structural reforms, and improving earnings visibility.
In a wide-ranging conversation, he also weighs in on the IPO market’s surprising strength, the maturing behaviour of retail investors, evolving opportunities in the corporate bond space, and the key sectors likely to outperform in the coming quarters. Edited Excerpts –
Q) The second half of 2025 started on a volatile note. How are you looking at the markets? One of the reasons could be FIIs selling, which continues in July.
A) The second half of 2025 has begun with heightened volatility owing to an uncertain global backdrop. Post the sharp rally witnessed in last quarter, FII flows have turned volatile.
Market valuations appear reasonable basis the forward earnings estimates and India’s favourable micro and macro resilience including lower cost of capital, benign inflation, and probable revival in consumption.
We expect that the measures taken by RBI and the government to start showing their positive impact on economic growth and corporate earnings from H2FY26.
This, coupled with expectations of strong revival in corporate earnings and favourable news flow around trade deal should aid the on-going market buoyancy.
Q) IPOs have picked up recently, but EY report highlighted that Indian IPO activity in the first half of 2025 recorded 108 deals raising USD4.6b, demonstrating market resilience despite a 30% decline in transactions.
A) Despite global uncertainties and volatile secondary market, Indian IPO market has demonstrated notable resilience. The amount raised through IPOs in H1CY25 stood at INR 512 billion.While the absolute deal count was lower than H2CY24, IPO proceeds were down by just 2% indicating shift toward larger, more selective offerings.
With a strong H2 pipeline, sustained market momentum, disciplined issuance, and strong institutional interest, 2025 IPO markets is likely to remain buoyant.
Q) What is the initial sense you are picking up from the June quarter results, which have started to come out?
A) While still early days, but at the first glance earnings reported so far look healthy and broadly in line. As expected, the incremental earnings growth is coming from cyclicals and to that extent the breadth is appearing slightly skewed with sector-specific resilience.
With only ~20% of the companies having reported thus far, some key sectors like automobile, consumer goods, industrials, healthcare, and telecom etc. are yet to start reporting in right earnest.
While we await more results, the focus will likely remain on execution, margin durability, and broadening of earnings participation.
Q) Is the current equity market rally largely liquidity-driven, or are there sufficient earnings fundamentals to back the optimism?
A) There is growing acceptance, amongst foreign as well as domestic investors, that globally, India is one of the best structural stories underpinned by structural reforms, macro stability, and robust corporate performance.
Indian corporates delivered strong double-digit earnings growth between FY20-FY24 with earnings growth moderating in FY25 owing to high base and confluence of global and local factors.
FIIs invested ~USD 6.1 billion between Mar’25 and Jun’25, partially offsetting the USD 13.8 billion outflows seen during Jan’25 and Feb’25. Meanwhile, DIIs remained consistent net buyers for the 24th consecutive month, with cumulative investments of USD 67.4 billion between Sep’24 and Jun’25.
The earnings growth outlook is improving on the back of supportive fiscal and monetary policy stance; benign commodity prices and favourable tax changes aimed at boosting consumption.
The current one year forward multiple, basis the expected earnings growth, is close to medium term average indicating that current valuations are reasonable factoring in improved macro backdrop, falling cost of capital and superior earnings breadth.
Q) SIPs crossed Rs27K crores – what does it talk about the retail investor behaviour change?
A) SIPs continue to scale new highs. Especially post the sharp correction witnessed from Sep’24 highs till Apr’25 lows, when Nifty corrected by ~10% and Nifty500 was down more than 12%, SIP flows held up quite firmly.
These are clear signs that retail investors have adjusted to intermittent market volatility and retail participation is deepening. Such behaviour has been seen in several instances of market whipsaw, where the retail investors have been holding firm despite interim market corrections.
This sticky, system-driven flows indicate sustained change in savings pattern, from physical to financial, of Indian households.
Q) How is the corporate bond market shaping up here in India?
A) Debt markets have evolved significantly over the past few years. In particular, the significant growth of long-term institutional investors has served to generate demand and liquidity across the yield curve.
Indian government now issues a 50-year security, one of the few countries to do so. To cater to the new source of demand, states have started to issue securities across the yield curve. Indian state and central government securities market has, thus, seen a significant increase in depth across the curve.
Indian government bonds have been gaining increased acceptance among foreign investors, as seen by the inclusion of Government Securities in various international bond indices.
Policymakers have taken measures to promote direct participation of retail investors in the debt market. Though early days, this can go a long way in developing the Indian fixed income market.
Q) Where are the pockets of opportunities coming from?
A) India enters H2CY25 with a constructive backdrop. Improving domestic growth visibility, policy alignment, augmenting rural trends and consumption demand offset by global demand uncertainty.
We continue to prefer domestic focused-sectors and companies over exports-facing names.
We have a positive view on consumer discretionary, capital market ecosystem plays, capital goods, electronics manufacturing services, telecom, healthcare and select bottom-up investment theme across hotels, travel, and consumer technology.
These sectors continue to outpace nominal GDP growth with stable operating trends and provide reasonably high growth outlook.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)