rewrite this title and make it good for SEOMarket may deliver 12–15% returns next year, but midcap outperformance unlikely: Sandip Sabharwal

In a market environment filled with stretched valuations and rising scrutiny of corporate disclosures, market expert Sandip Sabharwal’s recent views in an interview to ET Now offer a grounded and cautious perspective.

Reflecting on the concerns surrounding Kaynes, he explained that the information shared so far does not provide clarity but instead creates fresh doubts. He pointed out that “from whatever you read out, it raises more question than gives answers. So, that is a problem and the other part what many of the investors do not understand is this entire bill discounting thing.” According to him, such practices may artificially reduce receivables or debt, thereby making the balance sheet appear healthier than it really is. He added that “that also is questionable because then the balance sheet looks leaner than what it actually is,” noting that if this is a newly surfaced issue, it could be something investors may find “concerning.”

Discussing where he finds comfort in the current market, Sabharwal said that the broader backdrop for the coming year looks favourable for financials, with larger banks and many NBFCs expected to perform well. He also highlighted strong momentum in auto stocks and upheld L&T’s outlook due to its improved order booking and reduced leverage. Companies like Bharti, he said, remain fundamentally sound with the cash flows they are generating. Largecaps, in his view, continue to look “very solid,” while midcap opportunities will emerge gradually as on-ground conditions improve. He also believes the year ahead may deliver around 12–15% returns across market segments and stated, “I do not see a mid and smallcap outperformance at this stage.”

Sabharwal further emphasised that the market’s increasingly stringent reaction to accounting concerns in high-valuation stocks is warranted. He remarked that “these valuations are unsustainable,” drawing a parallel with the dot-com era when triple-digit price-to-earnings ratios were considered abnormal. Today, he noted, such valuations are often justified by projections of growth five or ten years into the future—even though many companies cannot accurately predict the next quarter. “How do [you know] what is going to happen five years hence?” he questioned, underscoring the speculative nature of such assumptions.

Turning to the ongoing pressure on Eternal, Sabharwal attributed much of the concern to persistent losses in the quick commerce segment. He acknowledged that “Blinkit is a superb execution actually outfit… what they have done is very good from the consumer standpoint.” However, he also pointed out the stark difference between operational excellence and investor expectations, noting that prolonged losses could eventually affect market sentiment. “If the losses continue the same way for the next two-three quarters, then we could see the stock actually come under pressure,” he warned, even though investors have so far shown patience with the stock trading around ₹300.