Market headed for tough times in next 6-12 months; Unmesh Sharma sees a largecap-driven, range-bound market

In a volatile market marked by conflicting global and domestic cues, investors should brace for a tough and highly selective environment over the next few quarters, says Unmesh Sharma, Senior Executive Vice President and Head of Institutional Equities at HDFC Securities. "So, the next 3, 6, 12, 9 months we expect to be extremely challenging," says Sharma talking to ET Now.

Global outflows vs domestic inflows creating a confusing market setup

Sharma describes the current market as “very confusing,” shaped by two opposing forces:

Foreign portfolio investors (FPIs) continue to sell, driven by global risk-off sentiment and uncertainty around the India–US trade deal.


Domestic institutional flows remain extremely strong, helping indexes hold up despite persistent global outflows.

But underneath the headline Nifty resilience, Sharma warns that multicap, midcap, and smallcap portfolios have taken a significant beating, raising concerns about market breadth and valuation fatigue.

Near-term outlook: Range-bound market with a bias toward largecaps

Sharma expects the overall market to remain range bound, at least until:

• FPIs return after the typically quiet December period
• Corporate results and FY27 commentary provide fresh direction

Despite India being one of the worst-performing major markets in 2025, Sharma believes FPIs have limited appetite to go further underweight. However, he also cautions that valuations remain elevated, restricting the possibility of sharp upside.

HDFC Securities’ model portfolio is positioned accordingly:

• Strong overweight on largecaps
• Highly selective midcap exposure
• Focus on domestic-facing businesses

Global themes: Do rate cuts, tariffs and a weak rupee make IT attractive again?

Sharma says global trends—rate cuts abroad, tariff shifts, and a weakening rupee—would typically make the IT sector an obvious beneficiary. And unlike earlier cycles:

• H-1B restrictions are not a major overhang
• Services are not affected by tariff changes
• A weaker rupee boosts profitability

But even with these tailwinds, he notes a major hesitation among investors: growth visibility is still unclear.

Client budgets remain under pressure, discretionary tech spending is yet to recover, and commentary from global peers offers little reassurance. As a result, the risk-reward trade-off in IT is still being debated, making investors cautious about building large positions despite the macro positives.

Sharma expects Indian markets to navigate a difficult period shaped by global uncertainty, stretched valuations, and tightening market breadth. Largecaps will likely outperform, while only select high-earnings-certainty midcaps may offer opportunities.