In a significant market commentary, Amar Ambani, a prominent stock market analyst and Executive Director at YES Securities, delivered a crucial message to investors on Thursday, November 27. He stated that it is time for market participants to recalibrate their return expectations from the Indian equity market, bringing them down to a more sustainable 12-14% range. This advice comes after a remarkable period of nearly three years where the markets delivered stellar returns exceeding 20% annually.
Market Peaks and Signals of Caution
Ambani's observations were made on a landmark day when the benchmark indices, the Sensex and Nifty14 months. Despite a sharp rally during intraday trading, the indices ultimately closed the day flat. This price action, Ambani suggested, is a clear signal of investor caution and profit-taking at elevated market levels.
He urged investors not to dismiss the Indian market despite its current challenges, emphasizing his belief that the medium-term outlook remains healthy even if the near-term trend has been difficult.
Key Challenges Weighing on Indian Equities
So far in 2025, the Indian stock market has significantly underperformed compared to its emerging market peers. In fact, this underperformance is the most severe in 25 years. A major factor behind this trend is the global crowding into Artificial Intelligence (AI) stocks. India is currently perceived as an anti-AI market that was already trading at rich valuations, making it the biggest laggard in its category.
Ambani also pinpointed two other critical headwinds:
- Trump Tariffs: India was among the nations worst affected by tariffs imposed by the Trump administration, including a massive 50% duty on Indian goods.
- Weak Rupee: These tariffs have pressured Indian exports and contributed to the rupee depreciating to an all-time low of 89.48 against the US dollar.
The combination of a weak rupee and high valuations has reduced India's attractiveness for foreign portfolio investors (FPIs). While robust domestic institutional flows have helped sustain index levels, Ambani highlighted that a large portion of this capital has been directed towards primary market issues (new listings) rather than the secondary market.
The Turning Tide: Reasons for Optimism
Despite these hurdles, Ambani believes the tide is turning in India's favour as the market hits new peaks. He cited several positive catalysts:
- A revival in corporate earnings.
- Consumption support through potential tax cuts and GST rationalization.
- Improved system liquidity.
- Inflation hovering at multi-year lows, which could prompt the Reserve Bank of India (RBI) to cut interest rates, especially if the US Federal Reserve follows a similar path.
- A gradual pickup in private capital expenditure (capex), supported by roughly ₹1.5 lakh crore raised through primary markets in the last two years.
Ambani concluded that after a prolonged phase of correction, market sentiment can improve faster than most anticipate. However, his core advice remains firm: investors should not expect a repeat of the 20%-plus annual returns and must reset their expectations to a more reasonable 12-14% for the next 12 months.
His final recommendation to investors was to stay focused on fundamentals. "Stay focused on earnings, balance sheets and asset allocation, not just headlines," he added, advocating for a disciplined and research-driven investment approach.
