Indian markets show signs of revival as broader market stage comeback: Devang Mehta

Indian equity markets appear to be turning a corner after nearly 18 months of a stealth bear market, according to Devang Mehta, Deputy Managing Director & CIO - Equity NDPMS at Spark Capital Private Wealth. Speaking to ET Now, Mehta noted that while the Nifty continues to face resistance near the 26,000 mark, conditions beneath the surface have improved dramatically.

Broader market recovery after painful correction

The headline indices told only half the story during 2024-2025. While benchmark indices held near lifetime highs, the median stock in the broader market fell nearly 28% — a figure that reveals just how widespread the pain was. "It was carnage all around," Mehta said bluntly.

However, the tide appears to be shifting. Post the Union Budget and the announcement of a US trade deal, market breadth has visibly improved across midcap and smallcap segments. Quality stocks that had suffered steep valuation and price corrections are attracting genuine buying interest for the first time in over a year.

Earnings recovery gathering steam

The Q3 earnings season provided a much-needed confidence boost. Mehta's analysis shows largecap companies delivered roughly 12–13% earnings growth on average, midcaps clocked 18–19%, and beaten-down smallcaps surprised with 20–23% growth. Crucially, revenue and topline growth — which had been missing for several quarters — made a comeback this season, signaling that the recovery is broadening beyond mere cost-cutting.

Private capex returning, GST-driven consumption, and SBI reporting 13–14% credit growth are among the macro tailwinds supporting the earnings outlook. Mehta expects analyst upgrades to follow in the next two to three quarters.

IT sector: Bounce possible, but caution warranted

With large-cap IT stocks down as much as 15% in February alone and trading at multi-year lows, a technical bounce of 10–15% is possible in the near term. But Mehta is not a buyer yet. The structural question of how Indian IT giants adapt their business models to artificial intelligence remains unanswered. "We generally avoided largecap IT," he said, adding that he wants to see at least two more quarters of management commentary and AI adoption clarity before re-entering. His portfolios maintain selective exposure only to ER&D and AI-oriented companies within the sector.

PSU banks: Clean balance sheets, compelling valuations

Among sectors Mehta is constructive on, PSU banks stand out. Years of disciplined lending have resulted in clean balance sheets with minimal bad debt accumulation. Valuations remain attractive for select names, and these banks are increasingly ramping up technology infrastructure to compete for market share. Mehta views PSU banks as a dual proxy — on India's infrastructure capex cycle and the ongoing financialization of household savings.

Market outlook: Risk-reward tilts positive

While Mehta declined to offer a short-term Nifty target heading into expiry, his broader message was clear: the market's character has shifted from "sell on rise" to selective accumulation. "The risk-to-reward is now positive on the reward side," he said, describing the current environment as offering good entry points across largecap, midcap, and select smallcap names — particularly those that reported strong numbers and positive management guidance this earnings season.