Ambit's Dhiraj Agarwal sees mid-single digit market returns over next 3-4 years

Dhiraj Agarwal, Managing Director of Ambit Investment Managers, sees the current market as being driven by bottom-up stock selection rather than broad themes.

According to him, every sector has companies that are outperforming the market and sectoral averages, while others are lagging behind, making it a selective environment.

He said, “We have seen bottom up markets many times in the past, but the most prolonged one was 1994 to 1998-99 five years that time Nifty was not so popular. So I remember five years Sensex oscillated between 2,500 at the low and 4,600 at the high, and it was a true blue stock pickers market. No theme actually worked, so I am looking at a very similar environment for the next few years.”

He expects overall market returns over the next three to four years to remain in the mid-single digits, but believes well-chosen individual stocks could deliver significantly better performance.

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Agarwal remains “positively biased” in the near term, he is cautious over the next 12 months given the disconnect between supportive macroeconomic indicators and lagging corporate earnings.

“The macros are still looking good. GDP growth number was outstanding, there is a good possibility that a trade deal will get signed with the US, and goods and services tax (

GST) cuts should result in some amount of demand revival going into the festival season. But eventually, the market will want to see all these macros translate into earnings growth. The jury is still out on that one,” Agarwal noted.

Despite limited index-level returns, Agarwal said he would not go underweight equities given the scope for bottom-up ideas. At the same time, he remains “very positive” on gold from gold from a three-to-five-year point of view.

“Everything which is happening globally—trade wars, geopolitics, and tectonic shifts away from a unilateral dollar-driven system—will continue to benefit gold as an asset class.” He advised investors to keep at least 10–20% allocation in gold depending on their risk appetite.

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Agarwal expects consumer discretionary, particularly automobiles and durables, to be the clearest beneficiaries of GST  rationalisation.

“For soaps and detergents, small price changes won’t matter much. But for cars, two-wheelers, TVs, and refrigerators, GST cuts can have a meaningful impact,” he said

For full interview, watch accompanying video

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