Motilal Oswal Financial Services‘ chairman Raamdeo Agrawal sees 15% returns from Indian equities as a probable outcome over the next five years. In an interview with Nishanth Vasudevan, the seasoned investor spoke about foreign investor sentiment, Zepto and capital gains tax, among other topics. Edited excerpts:

How are you assessing the market at this point?

I see this economy growing at about 7.5-8.5%, with corporate profits growing at more like 13-14%. So the index itself should give 12-14%.

Then it depends on how we manage our portfolios. Making 15% annually over the next five years seems to me the most likely outcome. That will double your portfolio. Markets have stagnated for two years, and maybe there will be another year of stagnation.

The Nifty is trading at 20 times, and if earnings grow by 15%, you can reduce the P/E multiple to 17. I think the markets will most likely go up by 15-20%.

Why aren’t foreign investors buying this story then?
Foreign investors are chasing momentum, like Korea and Taiwan. And the biggest momentum is in the US itself, so it is very difficult to get money out of there. All the money is heading there. This quarter, their earnings are up 47%. So, clearly, why would money come out of there?India had become the funding market for their allocations to other emerging markets because of the AI story. Now they are completely rattled by whatever is happening in Korea. Every day it is up 8% or down 8%. The AI story is still on, but AI is not the only thing in the market.

The good part is FIIs are in a “stop selling” mode in India. That itself solves 90% of the problem for me. We are in a phase where the downside is limited.

Read more: Can Horizon Parks IPO deliver long-term growth for high-risk investors?

Is India’s capital gains tax regime a deterrent for foreign investors?

See, it is one of the irritants for sure, but I don’t think that is the breaking point. The pain is coming from somewhere else, particularly the weak currency. They bring in dollars and must pay capital gains tax in rupees. So even if they have not made money in dollar terms, they still must pay capital gains tax. That’s what hurts them.

The thing is, most emerging markets generally don’t have capital gains tax, and it is worth thinking about. If you want a good long-term relationship with FIIs and want to keep attracting them, there should be a very friendly environment.

As one of the large investors in Zepto, what is your reading of its recent IPO attempt?

The message is very clear; till companies are actually profitable, or very close to becoming profitable within a visible timeframe, they should not tap the public market. Because it is very difficult to make the public market understand the underlying value.

Public markets are all about earnings, earnings and earnings. And every quarter you have to report them. You could be growing at 100%, and so there will be a cost of acquisition and, hence, there will be some losses. A large private investor can understand that; the public market cannot.

Mutual fund investors have to mark to market every day. So they don’t want to invest at a price at which they can have a mark-to-market loss tomorrow.

So my sense is that maybe it was a little premature for the company to tap the public market, and that too at this scale. They must have learnt from this.

Did this episode disappoint you?

Whenever something fails like this, I feel bad. You don’t want any entrepreneur to go through this kind of pain. Whether my investment is a failure will be decided after 10 years, not now.

But it looks bad when a company in which you have invested is passing through these kinds of challenges.

Did the promoters ask you for advice on the IPO? Did you speak to them after that?

Not after, but while this was going on, whatever I could suggest, I suggested to them. Once you are no longer hot in the minds of public-market investors, there is very little you can do about it. You have to become desirable, or worthy, for those mutual funds.

They are big guys, and it is their money. You have to become more worthy of their money. Basically, that is the message in total.

Among bank stocks, which ones are you liking the most?

I think the industry has the most pristine balance sheets I have ever seen. Now lending has started; credit growth is at 18%. The ones with the best management will do well. That includes ICICI, SBI, the AUs of the world, Federal Bank or Karur Vysya Bank. When you have an economy with a ₹230-240 lakh crore credit book, 18% growth is massive.

What about HDFC Bank?

There is pessimism among investors at large. All those things will someday be behind them; the regulatory requirements and all.

I can understand the pessimism around the stock price, but the bank is rock solid. Valuation-wise, this is among the lowest you could ever get it-probably the lowest in its history.

You have been sceptical about how to value IT stocks because of the AI disruption. Have you changed your mind?

A little bit. So, jobs will not be the issue. The issue is how much will the market expand. Obviously, clients will ask for productivity gains to be passed on to them.

To my mind, the bargaining position of services companies is a little weaker. So I would say they are “headwinded”, but it’s not as disastrous as it was thought to be 12 months ago.

But what are current valuations reflecting?

Valuations are reflecting almost a terminal-value kind of situation, literally zero growth.

You are getting a 5-6% free cash flow yield, which is around your bond yield. Now, I think we have seen the bottom, but the growth phase has still not started. It may stay here for some time, until there is clarity on enterprise AI.

Do you see a bubble in the AI theme?

Financial markets have seen big bubbles in 2000 and 2008. So, markets are very alert to this situation in AI. They are not letting it go completely out of hand. There is a self-correcting mechanism where people go overboard and then come back, like we are seeing in Korea.

Look at the sheer size of AI capex ($2-3 trillion a year), and that is spreading across the world. The world is sucking in all kinds of products such as cables, construction, cement, etc. So this prosperity is translating into corporate earnings. And hence the P/E multiples are looking reasonable.

If AI capex is overdone, then everything is overdone. If it isn’t, there might be some kind of slowdown, but I don’t think there will be a collapse.

As a stakeholder in the broking business, what is your take on disruption in the market around the closing auction system?

They were trying to solve a problem through this. But right now, it looks like it has created a bigger problem. That said, these things can be part and parcel of long-term reforms. When dematerialisation was made compulsory, there were problems then as well. Eventually everybody fell in line. Sebi is absolutely on top of the matter. If it is not working at the desired level, they will review it and do whatever is required. I don’t know. Let’s see.

The dollar remained under pressure after weak US economic data reduced bets for the Federal Reserve to raise interest rates next month.

A Bloomberg gauge of the currency’s strength slipped 0.1%, hovering around levels last seen in May. The dollar was weaker against all of its Group-of-10 peers after Friday data showed US retail sales fell in July by the most in more than a year as consumers pulled back on purchases.

Swaps traders see around a one-in-four chance that the Fed will raise interest rates next month. That’s down from a 50% chance only a week ago. Treasuries rose across the curve. The yield on the rate-sensitive 2-year fell two basis points to 4.15%, while that on the benchmark 10-year eased one basis point to 4.68%.

Read more | Nifty takes a breather as bulls and bears watch the next move: Analysts

Elsewhere, oil erased earlier gains as traders looked for the next catalyst to set direction, with renewed Israeli attacks on Lebanon and the prospect of fresh US sanctions on Iran adding to geopolitical uncertainty. Brent crude traded around $88.55 a barrel, having earlier climbed to almost $89. Asian stocks were little changed, with South Korea out for a holiday.Monday’s cautious moves came as investors watched for efforts to reopen the Strait of Hormuz, which may weigh on oil after it jumped almost 6% last week. With stocks near record highs on a revival in the artificial intelligence trade, attention remained on the Middle East for the next market catalyst after the weak US consumer data tempered optimism after back-to-back benign inflation readings.
“The most significant headwind for the market currently remains geopolitical uncertainty, which continues to weigh on market sentiment here and there – although the relative lack of military activity in the Middle East has lowered volatility at the margins,” said Kyle Rodda, a senior analyst at Capital.com.
In geopolitical news, Israel said it killed 11 people, including a senior Hezbollah commander, in strikes on southern Lebanon, one of the deadliest days of fighting in months.

The fighting on the periphery of the Iran war may further complicate what appears to be deadlocked negotiations between Washington and Tehran.

The sides are poised to arrive at the formal end of their own ceasefire agreement with no apparent path forward on the Strait of Hormuz and with the US readying an “economic isolation” plan.

In other corners of the market, futures contracts for the S&P 500 and the Nasdaq 100 Index advanced, after the underlying gauges slipped Friday on signs of a slowdown in US consumer spending.

Gold inched up 0.4% to about $4,390 an ounce.

Elsewhere, the yen traded stronger as Japan’s economic growth unexpectedly slowed in the three months through June as capital spending continued to slump.

On Friday, US equities slipped from a record as consumer sentiment slid more than expected and retail sales dropped the most in more than a year.

Focus will also be on the sale of 20-year US government bonds this week as it tests investor appetite for long-term debt following a few record-breaking auctions.

A slew of China data, including retail sales and industrial production, will be in focus Monday. Economists expect consumer spending to have picked up slightly in July, while factory output may have slowed, according to Bloomberg surveys.

China’s “macro momentum continues to deteriorate” as credit growth has slowed and inflation remains weak, Wee Khoon Chong, a strategist at BNY wrote in a note to clients. “July activity data are likely to reinforce the slowdown, with retail sales and high-tech investment the key areas to watch for resilience.”

After racing ahead by more than 1,000 points, Nifty has hit a pause. The index is now testing key support and resistance levels, with experts split between buying dips and selling rallies as traders look for the next decisive move.

SOMIL MEHTA

HEAD OF RETAIL RESEARCH, MIRAE ASSET SHAREKHAN

Trading Strategy
The Nifty rally is now cooling off after that sharp run, which is fairly normal after a move of that size. The index is still holding above its key daily moving averages — the 20DMA at 24,323 and the 40DEMA at 24,227. Traders can buy on dips between 24,227 and 25,190, with a stop loss of 24,050 on a closing basis, for a target of 24,774–25,000.

Bank Nifty: Bank Nifty has held up much better and has barely corrected in the last few sessions. For fresh long positions, it would be prudent to wait for a decisive break above the swing high of 57,885. Traders can buy above 57,885, with a stop loss at 57,158 on a closing basis, for a target of 57,885–58,700.
Read more | Equity investments should give about 15% annual returns over next 5 years: Raamdeo Agrawal

TOP STOCK PICKS
Garden Reach Shipbuilders & Engineers: Buy at CMP Rs 2,618.6 | Target Rs 2,740–2,800 | Stop loss Rs 2,535

The stock bottomed at Rs 2,471, broke its falling trendline, and turned bullish. With Rs 2,670 as key resistance, a decisive breakout above this level could confirm trend reversal and trigger the next rally higher.

Supreme Industries: Buy at CMP Rs 3,558.9 | Target Rs 3,685–3,750 | Stop loss Rs 3,425

The stock has given a breakout from an inverse head-andshoulders pattern, indicating a positive shift in trend. It is also trading above its key daily moving averages, while the daily momentum indicator has entered bullish mode after a positive crossover in Friday’s session.

DHUPESH DHAMEJA
RESEARCH ANALYST, SAMCO SECURITIES

Trading Strategy
Buying interest for Nifty is emerging around 24,300, but the recovery lacks strong follow-through. RSI at 52.21, below its average of 57.97, confirms moderating momentum without entering oversold territory.

Maintain a sell-on-rise approach below 24,500. Fresh shorts can be considered on a sustained break below 24,300, targeting
24,190–24,050, with a stop-loss above 24,400.

For longs, wait for a decisive reclaim of 24,500, which can trigger a move towards 24,600–24,700.

TOP STOCK PICKS
Ramco Industries: Buy | CMP Rs 356 | Target Rs 386 | Stop loss Rs 341

The stock’s breakout above multi-year resistance, with compressed volatility, rising volumes and strong moving averages, signals fresh price-discovery potential and a likely move towards new highs.

Shadowfax Technologies:
Buy | CMP Rs 251 | Target Rs 277 | Stop loss Rs 238

The stock shows bullish continuation, recovering from Rs 205–215, consolidating near Rs 250–255, holding above the rising 10-DEMA and 20-DEMA, with positive moving-average alignment supporting the trend.

HITESH RATHI
TECHNICAL ANALYST, ANGEL ONE

Trading Strategy
Nifty faced rejection at 24,750–24,800, confirming strong resistance. A breakout above 24,800–24,850 is needed to negate
weakness. Until then, rallies towards 24,500 favour sell-on-rise trades, with stop loss at 24,590 and target near 24,340, reflecting capped upside.

TOP STOCK PICKS
Indus Towers: Buy at Rs 380–382 | Target Rs 400–407 | Stop loss Rs 366

The stock holds strong support at Rs 370–365, with a W-pattern breakout above Rs 380 and bullish RSI crossover, signalling
strengthening momentum, emerging trend reversal, and buyers gradually gaining control.

Asahi India Glass: Buy at Rs 930–939 | Target Rs 990–1,010 | Stop loss Rs 885
The stock broke out above Rs 930 after support at its 20-brick moving average, confirmed by triple-top bullish breakout and
invalidation of bearish pole, signalling buyers’ control and potential for higher levels ahead.

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