BTTV Exclusive: Raamdeo Agrawal predicts roaring earnings growth, 40-50% Nifty upside in 2-3 years

Raamdeo Agrawal, Chairman and Co-founder of Motilal Oswal Financial Services, on Monday said that the market is scraping the bottom and the downside looks limited. He predicted "roaring earnings growth" over the next one year, driven by a base effect, saying the market has yet to price in the expected growth.

In an exclusive interview with Siddharth Zarabi, Group Editor at Business Today, the market veteran said the recovery might take a little longer but believes 40-50 per cent returns on the Nifty are possible over the next 2-3 years if earnings momentum continues.

Risk-reward favourable

"Let's not put a number, but upside is much bigger. Can indices go another 5-7 per cent lower? That is quite possible. I would say your downside-to-upside ratio is looking extremely favourable for investors. Your downside is maybe 5-7 per cent, or even 10 per cent, but upside is 50 per cent," Agrawal told Business Today TV (BTTV).

Motilal Oswal Financial Services has raised its earnings estimates for the Nifty for both FY27 and FY28 following stronger-than-expected corporate results in the September quarter. In its earnings review note, the domestic brokerage raised its FY27 earnings per share (EPS) estimate by 1.1 per cent to Rs 1,247 and its FY28 estimate by 1.6 per cent to Rs 1,428 from Rs 1,406 earlier.

Agrawal said equities are a risk market , and such a market will always have several risks. Anyone claiming there is no risk at all at any level would be foolhardy, he said.

"There is a risk, but risk is much lower than what could be the return," he said.

Things falling in place

Agrawal said stock markets are still in the midst of global uncertainty, but things are slowly falling into place.

One factor that was completely out of Indian investors' hands was the AI trade, Agrawal said. He added that oil prices would come down at some point because there is enough supply, while oil consumption is stagnating or declining.

"Oil is not a very long-term problem, but AI trade is. India, on the other side of AI, where Indian IT was actually losing out to AI, is itself reversing. I don't see any force which is going particularly against India, but still the environment outside is challenging," Agrawal told Sakshi Batra of BTTV.

The market veteran also cited the rupee's weakness, saying short positions worth $200-250 billion were outstanding in the futures market.

"Rupee is still one thing to watch. And as the rupee becomes stronger and more stable, I think the confidence of foreign investors will come back, as earnings are already in place," Agrawal said.

Market performance: 40-year trend

Drawing on his experience of the past 40 years, Agrawal said market momentum tends to strengthen in years when earnings growth picks up.

"This is the first or second quarter of earnings build-up. At least for four quarters, you cannot slow it down because the base effect is there. Most likely, from this Samvat to next Samvat, you will have roaring earnings growth," Agrawal said.

He noted that years with the highest earnings growth also tend to deliver the strongest market performance.

"We have to be in the market while the earnings growth is building up, not after seeing all the earnings are built up. Because by that time, what will happen is the market would have moved and if investors come after that, they may not make extraordinary returns," Agrawal said.

To make extraordinary returns, investors have to be a little lucky, the market veteran said.

"Most importantly, you have to buy at a reasonable price way ahead of time when the earnings growth builds up. So this is the time after seeing the earnings growth also, market is giving you this opportunity. Markets try to pre-empt the earnings growth. This time, market has not pre-empted the earnings growth. Market is saying, hell with the earnings growth, we will keep pushing it down," Agrawal said.