Worst phase behind, but index gains may be capped: Prime Securities’ Jayakumar

A strong rebound in Indian equities has lifted sentiment, but the road ahead may not be driven by broad-based rallies, according to N Jayakumar, Group CEO & MD of Prime Securities. He believes the worst of the recent correction is likely behind the market, though gains from here could be more measured and selective.

Jayakumar noted that recent gains were supported by easing global tensions and seasonal factors, particularly the typical March liquidity cycle. While the sharp pullback has brought relief, he does not see the current move as a short-lived bounce.

“I don't think it's a snapback. The worst, the darkest night of that particular period, is over, so things will only improve,” he said.

However, he cautioned that macro headwinds, especially elevated crude prices, could persist. He expects oil to remain structurally higher, which could act as a drag on the broader market and limit upside for indices. As a result, investors may need to shift focus from index-level calls to stock-specific opportunities.

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Jayakumar believes the market is moving back to a fundamentals-driven phase, where returns will depend more on individual sectors and companies rather than broad market momentum. He expects index performance to remain range-bound, with limited chances of a sharp rally to new highs in the near term.

On the technology sector, Jayakumar flagged concerns around slowing growth and structural changes driven by AI. He noted that valuations have corrected significantly, and companies are increasingly being viewed through a cash flow lens rather than as high-growth plays.

“When in doubt, stay out,” he said, suggesting investors may want to avoid the sector for now amid uncertainty around demand and business models.

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In contrast, Jayakumar sees potential in pharmaceuticals, particularly export-oriented generics companies. He highlighted that the sector remains under-owned and could deliver better-than-expected earnings growth, even as broader markets struggle.

He expects pharma’s weight in indices to rise over time, supported by consistent performance and relatively better visibility compared to other sectors.

Jayakumar remains constructive on metals, including steel and aluminium. While the sharp gains may already be behind, he expects these sectors to continue delivering steady returns, supported by pricing power and favourable global trends.

At the same time, he warned that commodities could face demand moderation if prices rise too sharply, though higher price levels may offset some of the volume impact.

For the entire discussion, watch the accompanying videoAlso Read | Why India may not lead the next Asia rally, according to Nomura’s Chetan Seth