'We see an earnings recovery, not a slowdown'

Summary: In a market obsessed with narratives and momentum, one fund manager is choosing discipline over drama. An interview on why patience, valuation and process still matter, even when markets test conviction and reward the noisy over the steady. At a time when markets appear increasingly driven by narratives and momentum, Neelesh Surana is reaffirming the virtues of discipline and patience. The Chief Investment Officer at Mirae Asset Investment Managers (India), who manages the Mirae Asset ELSS Tax Saver Fund and the Mirae Asset Large & Midcap Fund with a combined asset base of about Rs 70,800 crore, believes quality and valuation still matter, especially when markets swing between euphoria and mispricing. He argues that recent fund recoveries were less about tactical shifts and more about staying anchored to fundamentals as earnings broadened and market excesses corrected. In this interview, Surana explains why avoiding overpayment, managing risk tightly and trusting long-term processes remain central to delivering durable returns. Markets seem driven by narratives and momentum. Does that disadvantage a quality-and-valuation approach, or does it simply require a different kind of patience? We prefer to view it as a consolidation phase. This perspective allows us to remain optimistic, as the market is merely catching its breath after a robust recovery. The year 2025 has seen median returns dip into negative territory, influenced by several interconnected factors. First, we are observing what we term “earnings fatigue.” This phenomenon occurs when momentum slows down due to broader economic challenges, particularly in the first half of the year. As companies grapple with these difficulties, earnings growth becomes less predictable, resulting in cautious investor sentiment. Second, India has encountered significant valuation compression. Approximately 15 to 18 months ago, valuations were notably elevated, especially compared to other emerging markets experiencing surges. This discrepancy has led to persistent foreign institutional investor (FII) outflows, exacerbating the situation and contributing to global AI-driven rallies that have left Indian markets lagging. Despite these challenges, 2025 marks the tenth consecutive year of positive market performance—a rare streak in the financial landscape. This resilience underscores the strength of the economy and the underlying corporate earnings that continue to support growth. Looking forward, we anticipate an earnings recovery rather than a prolonged slowdown. Current valuations appear reasonable, suggesting moderate returns driven by earnings. A supportive macroeconomic environment, alongside fiscal measures and monetary easing from the central banks, strengthens our view. For instance, interest rates have dropped by about 1.25 percentage points, liquidity remains ample, and various fiscal incentives are being implemented. However, we must remain vigilant about