Expert view: Indian stock market to deliver healthy double-digit returns over medium term, says Bajaj Life's CIO

Expert view: Srinivas Rao Ravuri, Chief Investment Officer (CIO), Bajaj Life, is optimistic about the Indian stock market, as he believes the domestic market may deliver healthy double-digit returns over the medium term. In an interview with Mint, Ravuri pointed out that the stock market typically looks beyond near-term uncertainties and responds positively to improving fundamentals well before they become evident in reported earnings. Edited excerpts:

The Nifty 50's muted performance over the past two years reflects a phase of consolidation rather than a structural change in the market's trajectory.

Earnings growth moderated to single digits during FY25 and FY26, while heightened geopolitical uncertainties and a global preference for AI-driven markets weighed on investor sentiment and capital flows towards India.

Looking ahead, we believe the outlook is turning increasingly constructive.

Consensus estimates suggest Nifty50 earnings could grow at around 15% CAGR over the next two years, supported by improving domestic demand, moderate inflation, lower interest rates and continued policy support.

At the same time, geopolitical risks have eased somewhat, and while the exceptional outperformance of global AI-related stocks appears to be moderating, allowing investor attention to broaden beyond a narrow set of themes.

History also offers reason for optimism. Indian equities have witnessed similar periods of subdued returns in the past, followed by phases of strong wealth creation.

Such consolidations help reset valuations and create a healthier foundation for the next leg of the market.

India's long-term growth drivers—favourable demographics, formalisation of the economy, rising financialisation of savings and sustained reforms—remain firmly intact.

Against this backdrop, we believe the risk-reward for equities is favourable and expect Indian markets to deliver healthy double-digit returns over the medium term, driven primarily by a recovery in corporate earnings.

Valuations today appear far more balanced than they did a couple of years ago. Following an extended period of market consolidation, the Nifty 50 is now trading close to its long- term average valuation multiples, making the market considerably more attractive from a medium-term investment perspective.

The recent Middle East conflict had initially raised concerns around higher crude oil prices and the consequent impact on corporate earnings.

However, the situation has evolved more favourably than anticipated. At one stage, elevated crude prices posed a potential 7–8% downside risk to FY27 Nifty50 earnings.

With oil prices retreating sharply and supply disruptions remaining limited, the likely earnings impact has now moderated to around 2–3%.

The decline in prices of several crude-linked imports, including fertilisers, chemicals and other commodities, is also expected to support corporate margins across sectors.