Nifty likely to hit 26,000 by 2025-end, current valuations not stretched, says Himanshu Kohli of Client Associates

Himanshu Kohli, Co-founder, Client Associates believes current Nifty level of 23,500 is reasonable, not stretched, valuations are elevated but not euphoric. Kohli predicts Nifty target for the year-end to be around 26,000. He also suggested that tactical corrections would be healthy and may offer better entry points. Investors should watch for profit-booking in overbought segments, particularly in small and mid-caps. Unlike the fast rally to 26K, the next move higher will require broad-based earnings growth, especially in lagging sectors like IT and consumption, added the expert. Edited Excerpts.

Do you believe the current rally is sustainable, or will the near term remain volatile?

The medium-to-long term outlook remains constructive, but volatility in the near term is likely, especially around domestic consumption and investment cycle, crude oil and inflation trends, geopolitical risks and Q4 earnings besides the tariff wars. Tactical corrections would be healthy and may offer better entry points. Investors should watch for profit-booking in overbought segments, particularly in small and mid-caps. The long-term trend remains constructive, but the next leg of the rally needs fundamental validation through earnings as well as a clear path towards higher tariffs by US.

What factors will provide clear directionality for Indian markets in the near term?

Expect directionality to emerge based on earnings delivery, Fed policy clarity, and macroeconomic stability. Trump’s return to the White House introduces some uncertainty around global trade and tariff policies, but India’s broadening trade partnerships and economic resilience provide a buffer. Markets may consolidate or turn stock/sector specific unless a clear macro trigger unfolds. If global cues remain supportive and earnings surprise on the upside, the rally could resume with renewed momentum. However, any disappointment—especially from global central banks or crude price shocks—could lead to short-term corrections. How the US tariffs unfold post 2 April is also a key monitorable in the near term.

What are your expectations from the upcoming RBI Policy?

Given the softening of inflation as well as the fall in USD index, expectations are high for a rate cut from RBI. A slackening domestic economy needs monetary support given the constraints around fiscal. Further rate cuts and liquidity support from RBI would depend on inflation remaining benign and US yields also remaining subdued. Given the importance of food inflation, the upcoming monsoon will also been keenly watched.

Nifty target for 2025-end – has it changed from your earlier projection?

Unlike the fast rally to 26K, the next move higher will require broad-based earnings growth, especially in lagging sectors like IT and consumption. Current Level (23,500) is reasonable, not stretched, valuations are elevated but not euphoric. Nifty target for the year would be around 26,000 (if Fed cuts + earnings beat + global sentiment lifts risk appetite).

While FPIs have returned in March, do you think they are here to stay?

FPIs seem more constructive on India now, but their flows will still be tactical in the short term and structural in the long term. If India continues to deliver on growth and stability while global risks stay in check, FPIs are likely to deepen their India allocations—though some near-term volatility in flows is natural. It seems that the USD index has peaked and the sharp depreciation in rupee is behind us; in this backdrop coupled with more reasonable valuations bode well for the FPI inflows.

What are the key challenges for the markets today?

While the long-term India story remains strong, markets are facing valuation pressures, global uncertainty, and potential macro shocks. Navigating this phase requires selective stock-picking, quality bias, and a watchful eye on global triggers. Investors should be prepared for short-term corrections or sectoral rotations as the market digests elevated valuations.

What is your view on broader markets—accumulate or stay away?

Broader markets still hold long-term potential, but entry should be selective and staggered. Focus on companies with strong cash flows, visible earnings growth, and low leverage, rather than chasing momentum. Avoid speculative names and use dips to accumulate fundamentally sound businesses with a 3-5 year horizon. A quality-over-value/momentum approach is essential now, as the broader market may go through time-wise or price-wise correction. Investors should consider SIP or phased buying strategies in small and mid-cap funds to manage risk effectively.

Patience, valuation discipline, and bottom-up stock picking will be key to riding the next leg of growth in this space.

What is your outlook on the real estate sector, given that it has been the biggest laggard this year?

The real estate sector may remain soft in the short term, but the long-term story is intact with strong structural drivers. Investors should focus on well-managed developers with clean balance sheets, strong launch pipelines, and execution capability. Avoid overleveraged or speculative names—stick with leaders in residential, commercial, and mixed-use realty.

Use any continued correction as a chance to accumulate gradually, with a 2-4 year horizon as rate cuts and demand revival kick in.

Will the IT sector recover in FY26? What are your top picks?

Yes, the IT sector is likely to recover in FY26, led by cost-optimization deals, cloud, AI, and automation-focused projects. Recovery will be gradual and backend-loaded—with better visibility from Q2–Q3 FY26 onwards. Expect leadership from large-cap IT with global scale, strong order books, and domain-specific verticals. Investors should accumulate in phases—valuations are reasonable, and downside is limited from current levels. Smaller IT players with high exposure to BFSI/Europe may lag, so stick to quality names.

Top picks –

TCS – Strong execution, diverse verticals, leader in AI and platforms.

HCL Tech – Robust ER&D, strong cloud/infra portfolio, consistent deal wins.

LTIMindtree – High-growth exposure, digital-first focus, synergy benefits.

Persistent Systems (for mid-cap exposure) – Deep capabilities in cloud, data, and platforms with strong US client base.

What investment strategy would you suggest for new investors in this volatile scenario?

Stick to a disciplined, diversified, and SIP-based strategy with a long-term mindset.

Focus on quality, asset allocation, and consistency rather than chasing returns or timing the market. Volatility and patience are the best friends and when used right—it creates buying opportunities, not panic exits.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.