Stocks to Buy | Markets in Limbo: Rakshit Ranjan on what will drive the next move

The markets have been fluctuating between red and green zones, showing no clear direction. For over a month, it has remained in a narrow range, leading to investor uncertainty. Adding to this are earnings results which have come in below expectations compared to last quarter, creating a subdued sentiment.
Rakshit Ranjan in an interview to ET Now pointed out that there is a significant moderation in earnings growth and valuations are nearing cyclical highs, which explains the lack of momentum.

From FY21 to FY24, the Nifty 50 experienced a strong 24% CAGR in earnings growth. However, in the past four to five quarters, this pace has slowed considerably, with growth dropping to mid to high single digits.

Rakshit highlights that this steep moderation in earnings, coupled with valuations touching 21–22 times FY26 PE, has created a challenging environment for investors. Hence, market breadth may no longer work; selective stock-picking becomes key.

The Marcellus Consistent Compounders Portfolio (CCP) has delivered EPS growth of 14% in FY25 so far, far ahead of the Nifty 50's 6%. Rakshit explains that this outperformance comes from a conscious effort to avoid relying on macroeconomic tailwinds.
Instead, the portfolio is built bottom-up with a focus on companies that have strong competitive advantages and high return on capital employed. These companies also reinvest their earnings at a high rate, supporting long-term compounding.

Healthcare has become a dominant theme in CCP’s portfolio over the past 12–18 months. This includes segments like hospitals, diagnostics, and even health insurance—which overlaps with BFSI. Additionally, select pharma companies with IP-led models, rather than generics, have been included.
Outside healthcare, traditional sectors like retail and consumption are still present, but the focus is on businesses that align with new supply and demand patterns—such as large-format stores and quick commerce players—offering better long-term growth visibility.

Rakshit acknowledges the intense competition in the quick commerce space, with significant capital chasing these new models. However, he believes this is not a short-lived trend. Instead, quick commerce and e-commerce represent sustained disruption in how goods are bought and sold.

He adds that although individual companies may still be in investment-heavy phases, identifying the winners early can deliver strong returns. While CCP does not directly hold stocks like Eternal, it does have exposure through a job listings firm invested in similar ventures.

FII flows have remained weak, especially in sectors like IT and financials. While some sporadic buying has been seen, the overall trend continues to be negative. Rakshit avoids speculating on FII/DII flows due to the many variables involved.
On the banking side, he highlights that the sector has entered a phase of differentiation. High-quality lenders are separating from the rest in terms of NPAs, deposit growth, and margin management. This “men versus boys” scenario is expected to deepen as interest rate pressures emerge.

According to Rakshit, the market going forward will be narrower and more stock-specific. Investors can no longer rely on sector-wide rallies. Instead, earnings surprises will determine which stocks outperform.
He believes that bottom-up conviction, combined with a focus on business quality and sustainable growth models, will be the key to generating returns in this environment. Stock selection, not sector exposure, will drive performance.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)