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Kotak Life flags full-to-rich valuations, expects moderate returns in 2026
The outlook depends on a normalisation in the West Asia conflict, with weak monsoon and elevated crude oil prices cited as near term risks.
Kotak Life Insurance’s head of equity, Hemant Kanawala, said much of India’s stock market still trades at full-to-rich valuations, even as he sees selective value in parts of the market. In comments to Mint, he noted the Nifty is around 19.7 times FY27E earnings, near its long term average, but that value is concentrated rather than broad based because consumption and investment stocks remain richly valued.
Kanawala expects moderate positive returns over the remainder of 2026 after the West Asia conflict normalises, adding that the near term is likely to stay choppy and event driven. He pointed to the monsoon and crude oil prices as key risks for the market’s path.
He said the next market leg should be earnings led instead of valuation driven, with Nifty earnings forecast to grow nearly 17% to 18% in FY27 after a muted FY26. He also argued that a durable end to the conflict and softer crude could ease inflation, support margins, and reduce the risk of large earnings downgrades.
On the domestic side, he cited resilient consumption supported by tax and rate cuts, a gradual revival in private capex, strong credit growth, and improving external flows through FCNR and ECB measures as positives. Still, he warned that prolonged conflict could push crude above $100, raise the current account deficit and inflation toward 6%, and trigger rate hikes, while elevated IPO and promoter and PE selling could absorb liquidity, and foreign investors have been net sellers of nearly $25 billion calendar year to date, according to the interview excerpts.
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