Kotak Mahindra Mutual Fund Forecasts Mid-teen Equity Returns Driven by Earnings Growth
Kotak Mahindra Mutual Fund anticipates equity market returns to be in the mid-teens, between 15% and 17%, fueled by double-digit earnings growth in the upcoming fiscal year. Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company (AMC), stated that equity returns this fiscal year are likely to hinge on earnings growth, with expectations for India Inc to achieve double-digit growth in FY27. This shift is expected to attract foreign portfolio investors, bolstering market liquidity.
Shah noted that midcap stocks are expected to outperform both large and small caps, although the extent of this outperformance may be limited.
In terms of precious metals, Shah indicated that gold and silver are likely to continue appreciating, supported by persistent central bank purchasing. However, he cautioned investors to temper their return expectations.
As of 2025, data reveals that the BSE Midcap index has delivered a modest 0.4% return, while the Sensex has increased by 8.6%. In contrast, the BSE Smallcap index has declined by 6.6%.
Kotak MF has identified key investment themes for 2026 within the financial services, consumption, e-commerce, and healthcare sectors. Addressing the recent depreciation of the rupee against the dollar, Shah remarked that further depreciation is likely, with the 90-per-dollar mark becoming the new norm for the Indian currency. He attributed this expectation to higher inflation in India compared to its trading partners and lower domestic productivity.
Shah mentioned that a 2% to 3% depreciation of the rupee is a natural adjustment considering existing imbalances. Despite short-term fluctuations in foreign portfolio investments (FPI), he emphasized that there is little potential for the rupee to appreciate permanently.
According to Kotak MF, the financial services sector is poised for improved performance due to increased credit growth and profitability. Consumption is anticipated to rebound strongly, driven by rising incomes, GST reforms, and seasonal demand during festivals. Rural per capita income has surpassed the $2,000 threshold, a pivotal point that typically prompts higher discretionary spending, particularly benefiting sectors like automobiles.
E-commerce penetration is projected to reach 12% to 13% by FY30, with categories like electronics and beauty seeing significant growth. The e-commerce landscape remains highly concentrated, with the top three players holding almost 80% of the market share.
Healthcare spending is also on the rise, attributed to an aging population and growing chronic health issues. India, which boasts one of the largest elderly populations globally, is expected to see this demographic double over the next 25 years.
In the fixed income sector, Kotak MF believes India’s chances of entering the Bloomberg Global Aggregate Index have strengthened, with an official decision anticipated in January. This move could result in potential inflows of approximately $25 billion.
Published on December 3, 2025.
