Market may deliver bumper returns by next Diwali as valuations and earnings align, says Raamdeo Agrawal

Indian stocks enter Samvat 2083 with renewed momentum, after the Nifty surged 8.6% last week and reclaimed the 25,000 mark during a seven-session winning streak. The rally has revived hopes that two years of market stagnation could give way to stronger returns, supported by improving earnings, foreign inflows and easing global pressures.

“After two years of stagnation, market has the potential to give investors bumper returns by next Diwali, because of confluence of low valuation and high earnings growth,” Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services, said in his Muhurat Trading message.

Agrawal said a potential crash in oil prices, a stable currency, the return of foreign investors, moderation in the artificial-intelligence hype and broad-based earnings growth could support higher valuation multiples.


Indian equities are set for a special Diwali trading session on Sunday, after a sharp turnaround in investor sentiment. Strong second-quarter earnings, healthy October auto sales and firm GST collections supported the market, while softer crude prices, lower US Treasury yields, an easing dollar and a firmer rupee added to the positive backdrop.

“Dalal Street lit up ahead of Diwali,” said Vinod Nair, Head of Research at Geojit Investments. “Indian equities logged one of their best weekly gains with the Nifty reclaiming 25,000 on a seven-session winning streak.”

Nair said the US midterm election verdict revived hopes of de-escalation in the Iran conflict and a softer stance on tariffs. Crude fell below $100 a barrel, while foreign investors returned as heavy buyers after months of selling, rotating out of crowded AI trades.

“Talk of tax relief in the upcoming Union Budget added fuel,” Nair said. The market also shrugged off an AI-led rout on Wall Street as investors treated India as a relative safe harbour.

Market participation remained broad-based during the week, with private banks leading the rally after facing pressure in recent weeks amid margin concerns. Autos and consumption-oriented sectors gained on festive demand, while IT and PSU banks remained relatively subdued. Domestic institutions booked profits, but strong foreign inflows absorbed the selling pressure.

The reversal in institutional flows was a key catalyst for the rally, according to Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments.

“Last week the market witnessed a sudden and complete role reversals from institutions - FPIs turned aggressive buyers and DIIs turned sellers on all days,” Vijayakumar said. “The aggressive buying by the FPIs and the consequent short squeeze triggered a big rally in the market.”

He attributed the shift in foreign-investor sentiment to the sell-off in AI-linked markets, including the US, South Korea, Taiwan and Japan, driven by concerns over data-centre spending.

“The AI sell-off has made India, which is widely regarded as a non-AI trade, attractive for FPIs,” Vijayakumar said. “Furthermore, the impressive earnings growth in India and the attractive large-cap valuations, made India a favoured investment destination.”

Foreign portfolio investors bought ₹45,970 crore in Indian equities in November so far, Vijayakumar said. Their buying has focused on index heavyweights in financials, IT, automobiles and telecom.

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