Indian Equities: Range-Bound Trading & Improving Long-Term Outlook

Indian equity markets have navigated a largely range-bound period for approximately two years, testing investor resolve. However, PPFAS CIO Rajeev Thakkar indicates that opportunities are now expanding, signaling an improved outlook for future returns.

Market Phase and Fund Strategy

Thakkar noted this sideways market trend is neither unusual in duration nor in the magnitude of decline from prior peaks. He confirmed that equity markets inherently involve volatility, which is the trade-off for potentially higher returns compared to fixed deposits.

The PPFAS Mutual Fund remained cautious through 2024’s market exuberance, consciously allowing cash levels to increase. Following two years of time correction across the broader market and price corrections in specific segments, Thakkar sees more investment avenues emerging.

PPFAS Cash Levels Adjust to Opportunities

Cash holdings within the Parag Parikh Flexi Cap Fund reached a peak of around 25%. These levels have since adjusted downwards to approximately 14-15% as the fund identifies more buying opportunities.

Thakkar anticipates a further decline in cash levels, potentially moving into single digits, reflecting increased deployment. He added that maintaining cash over the preceding two years proved beneficial, specifically aiding returns during the sideways market phase.

IT Services and Broader Economic Support

The current sell-off in IT services is viewed by PPFAS as a strategic opportunity rather than an existential threat. Thakkar drew parallels to past industry shifts, such as Y2K and the rise of cloud computing, which similarly raised concerns about outsourced IT demand.

Looking ahead, SEBI projects that India’s robust domestic economy will provide essential support for markets during 2026-27. This positive domestic backdrop is expected to bolster market resilience, even amid ongoing geopolitical risks.

Despite the recent period of market consolidation and external pressures, the increasing availability of investment opportunities and strong domestic economic fundamentals point towards a more positive trajectory for Indian equities.