Ms. Fatema Pacha

Fund Manager - Equity, Mahindra Manulife Mutual Fund

Ms. Fatema Pacha has over 19 years of work experience of which around 15 years have been in the field of equity research and fund management. Prior to joining MMIMPL, she was associated with ICICI Prudential Life Insurance and UTI Mutual Fund. She holds a PGDBM (Finance) from SP Jain Institute of Management & Research, Mumbai and a BE (Computers) from Thadomal Shahani Engineering College, Mumbai.

Please note we have published the answers as it is received from the Fund Manager of MAHINDRA MANULIFE Mutual Fund.

Q1. The year 2025 has been quite challenging for Indian equities, while commodities like gold and silver have outperformed. Given this divergence, how do you assess the current market structure and valuation trends within the Sensex and Nifty?

Ans: We have to always remember the 15% CAGR return rule that Indian equities have delivered over longer periods of time. There tends to be excesses on the top and bottom and that ensures period of time and price correction.

If we compare valuations for Nifty/Sensex the earnings rollover has made Nifty cheaper and it now trades at 20x FY27. Also, last year the valuation gap between India & the world was quite high. However, in the last 12 months with India under performing Emerging Markets our valuations have converged even versus the region making it attractive for global investors.

Gold & Silver have given stellar returns and many investors feel they have missed the rally. However, we would like to remind that generally peak and bottom is formed on greed and fear and investors have to be extremely mindful about asset allocations.

Q2. We've seen a surge in IPO activity this year. How do you assess current market valuations, and do you believe the post-listing performance of new issues is sustainable?

Ans: Around 80 companies have raised around $14 billion, nearly Rs 1.17 lakh crore in 2025 so far, compared to 91 companies that mobilized Rs 1.59 lakh crore in 2024. The numbers still look large, but both in terms of count and size, there seems to be moderation, even as the retail frenzy around IPOs remains visibly high.

There is a strong pipeline of upcoming IPOs with over 200 companies and an estimated issue size of about Rs 2.9 lakh crore. Instead of growth-driven issuances, a larger portion of new capital is being channeled toward debt repayment, promoter exits, and general corporate purposes.

CY25TD have seen 15% of IPOs sustain > 25% listing gains and 31% IPOs are below IPO price. Clearly shows the divergence between subscription frenzy and post-listing returns.

Q3. Corporate earnings have been muted in recent quarters. With the government's fiscal push and GST-related gains, when do you expect to see these factors translating into improved corporate balance sheets?

Ans: Corporate earnings have been muted last year in H2 and has had some impact in Q1 as well. However, Q2 earnings growth is seeing improvement and we believe FY26 can report 8-9% Nifty EPS growth. FY27 earnings growth estimates are yet strong at 14-15%. Short term GST transition issues aside, we believe the Income tax cut of the budget and the GST rate cut will lead to improved demand conditions translating into improved corporate revenue and profit growth.

Q4. As we enter the festive season, what are your expectations for the equity markets in October? Do you foresee any short-term momentum or sectoral themes playing out?

Ans: Market has been in a time correction mode and we have had significant FII selling in the last 12 months. Incrementally we believe that the US trade deal may be signed soon. Valuations are not as expensive as before and corporate earnings growth has started to improve. We are positive on Financials and Consumption themes.

Q5. What approach would you recommend for long-term investors for the remainder of 2025, given the current market and macroeconomic environment?

Ans: We believe asset allocation remains key for investors in their journey of wealth building . The allocation is applicable to both equity as an asset class as well as choice of market capitalization within equities. From investors perspective, we continue to believe that an aggregate large cap offers better value and margin of safety as compared to micro caps, small caps & mid-caps.

Investors with near-term objectives or low risk appetite can opt to prefer Equity Hybrid Funds or asset allocation funds. Investors with a longer-term horizon can continue to remain invested with fresh equity allocation towards large caps.

Q6. How vulnerable do you think Indian equities are to global macro risks such as rupee depreciation, rising US interest rates, elevated oil prices, and the ongoing US government shutdown concerns?

Ans: Currently we believe the major risk facing the world economy is geopolitical risks from Trump decisions on trade tariffs across all countries. As the resultant impact of the tariffs on the US economy and inflation is unknown. US and global equity markets along with gold & silver have been in a strong momentum phase. So, the major risk for India can be the unwinding of the global risk-on trade. However, considering our markets have gone through consolidation (time correction) in the last 12 months, Indian markets may emerge as a relative outperformer in the event of a global risk off scenario.

Note: Views provided above are based on information in the public domain and subject to change. Investors are requested to consult their mutual fund distributor for any investment decisions.

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