Markets face 4% upside, 11% downside risk from current levels despite policy push: Amish Shah

Speaking to ET Now, Amish Shah said that while the government and the Reserve Bank of India are doing their bit to stimulate demand through policy measures, the market’s upside remains capped. “The fair value for Nifty by the end of the year is 25,000. Since we are already around those levels, we think the incremental upside is very limited. In the best case, there can be a 4% upside, but in the worst case, we see an 11% correction,” he noted.

The Tariff Overhang

Shah pointed out that the 50% tariffs announced by the US could prove to be a temporary negotiating tactic. Still, the risk lies in how long they stay. “Every 500 basis points of tariff adds a 30-basis-point hit to US GDP growth and 30 bps to inflation. With tariffs rising from 2.3% to 16% in recent years, that potentially shaves off 100 bps of growth in the US. If that triggers a correction in US markets, India cannot remain insulated,” he warned.

Government Push vs. Market Expectations

Despite policy support—from GST cuts and rate reductions to a strong festive season—the upside for markets remains constrained. Shah explained, “Yes, there will be a recovery in consumption, capex and credit growth, but it will be shallow compared to what markets are pricing in. Earnings continue to get downgraded, and fundraising activity—$30 billion so far with another $50 billion expected—will cap liquidity.”

Consumption and Capex: A Mixed Bag

On consumption, Shah highlighted that the $48 billion stimulus rolled out in the last year may not fully translate into spending. “Much of this will go into rebuilding savings and repaying expensive loans, not directly into consumption,” he said. Similarly, on capex, he noted that government balancing between subsidies and investments could limit growth. Credit demand, too, looks muted as corporates sit on large cash reserves while banks remain cautious about unsecured lending.

Sector Rotation: The Way Forward

While the broader market may remain range-bound, Shah sees opportunities in sector rotation. “IT is under-owned, valuations have cooled, and negatives are already priced in. Utilities, too, after a sharp 30-35% fall, now offer defensive value and dividend yields. Some consumer discretionary pockets—like building materials, travel, and durables—also look attractive,” he explained.For investors, the message is clear: the easy money has already been made. “If you’re nimble, play the volatility—buy dips, sell rallies, and rotate sectors. That’s the best way to generate alpha in this market,” Shah concluded.