“Lull is not a bad thing in the kind of environment that we have had in the last 6 to 12 months because we have had a lot of problems to deal with and in this environment if the Nifty has been range bound, it is a big win for the bulls. Support levels have worked every single time. Liquidity has played its part in protecting the market and it seems as if most of the negative news flow is now behind us,” Shah observed.
He credited the government’s budget and tax-related reforms for providing a strong foundation. “I am firmly of the opinion that the government has really put out a master stroke this year, early in the year in terms of the budget, the money that came into the hands of consumer on account of income tax slab changes and then this GST development and with the RBI governor doing just about everything in favour of the economy and markets, I want to believe that people are trying to join the dots,” he said.
On technical levels, Shah sees 24,850 as a key resistance. Once breached, he expects 25,000 to be the “final hurdle” before Nifty attempts to scale its all-time peak of 26,200. “We are at the doors of that number. Once that is cleared, 25,000 is probably your final hurdle. And once that number is clear, I am quite confident that we should see the Nifty approach the life-time highs of 26,200 and join global markets in doing well and staying in a bull trend,” he noted.
Long-Term Outlook: Beyond the Index
When asked about the timing of a decisive move, Shah argued that even hovering near record levels would be a success, given India’s high valuations and persistent foreign selling. “Honestly for the index itself, if we can get close to life-time highs and stay around it, that itself is a big win. However, for somebody who is planning this market for the next couple of years, I want to believe that we can test levels of 27,500, which is a working number from a more longer term perspective,” he said.
But for him, the real opportunity lies beyond the Nifty. “It is not about the Nifty anymore. The last three years was about the Nifty and the index and the largecaps. It is really about the midcaps and smallcaps and specific sectors. So, forget the Nifty because that will keep you demotivated at all times. Focus on sectors and you should be sorted for next year.”
Sectoral Bets: Autos, Metals and Banking
In terms of sectors, Shah is bullish on autos and metals while maintaining a watchful eye on banking. “Auto which is driven by the GST developments and the fact that it is coming out of almost one year of underperformance is our top pick and I do see the auto index moving to lifetime highs,” he said, adding that top auto stocks could gain 15–20%.Metals, meanwhile, are his “dark horse.” “The metals index is preparing for a run towards 10,200 and 10,800. A lot of the top stocks are setting up beautifully after a lot of hard work in the last one year,” he said, pointing to Hindalco, JSPL, JSW Steel, Tata Steel and NALCO as examples of stocks showing inherent strength.On banks, Shah remained cautiously optimistic. “Banking has respected support, 53,500 on the Bank Nifty is important. Valuations are comfortable. Yes, there is a bit of FII selling happening there, but still there is a lot more value than many other parts of the market. So, given all of that the banking sector overall will come back. If the economy picks up, banking is a reflection of the economy and it will do well over the next 6 to 12 months and our working target is 57,500.”
Reading the VIX and IT’s Underperformance
India’s volatility index (VIX) remains unusually quiet, a fact that Shah interprets as a sign of strength. “It just tells you there is no fear in the system. And the fact that it is at levels of 10 and 11, it tells you that the market is very relaxed and seems to be preparing for a breakout. Only if VIX stays above levels of 14 would I be concerned, otherwise I am reading it as a very positive development,” he said.
However, IT remains firmly on his underperformer list. “It is an underperformer and it will remain an underperformer because this is a sector that has extremely high valuations. A lot of the positives of the next three years is already in today’s price. AI seems to be a big challenge… this underperformance is going to continue. Simply do not touch it at this point of time,” he cautioned.
Outlook
For investors, Shah’s message was clear: stay committed, focus on stock-picking within promising sectors, and avoid getting distracted by short-term index swings. With global markets strong and domestic fundamentals improving, he believes Indian equities are preparing for their next leg higher.
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