Macro indicators improve, but tariffs and valuations cap market upside: Kotak’s Sanjeev Prasad

Sanjeev Prasad, MD & Co-Head of Kotak Institutional Equities, said the temporary nature of the recent US trade tariff changes makes it difficult for businesses and investors to draw firm conclusions, creating planning challenges for exporters and importers.Speaking from the sidelines of Kotak Institutional Equities’ Chasing Growth 2026 Investor Conference, Prasad said that while tariffs linked to India have declined from 18% to 15%, the change does not materially alter the competitive landscape because several other countries fall within a similar tariff range.

“Uncertainty itself is a bigger problem, not so much as the announcements over the weekend,” he said.
Also Read | Indian IT stocks may need valuation reset as growth slows, says Envision’s Nilesh ShahPrasad said recent high-frequency indicators suggest improvement in India’s economic activity levels, supported partly by policy rate cuts and easier monetary conditions.. Electricity demand has picked up, while cement and steel demand trends remain steady. Credit growth has also accelerated to nearly 15%, compared with around 10% seen earlier in the financial year.

However, the sustainability of the recovery will depend on continued investment and job creation.

Corporate earnings have also shown improvement. Nifty 50 companies reported around 10% profit growth, while a broader coverage universe recorded roughly 15% growth, beating estimates.

Despite improving earnings and economic data, Prasad cautioned that market valuations remain elevated. The Nifty 50 trades at around 21 times one-year forward earnings, with expected profit growth already priced in.He said stronger earnings delivery will be necessary to justify valuations, especially after earnings downgrades seen over the past two years. Foreign investor interest may remain measured as other emerging markets (EMs) currently show faster earnings growth and lower valuations.

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Discussing artificial intelligence (AI), Prasad said it is still too early to assess its full economic impact. IT services exports account for about 6% of India’s gross domestic product (GDP), and the workforce exposure remains limited relative to the overall labour market.

He said the effect on consumption may appear mainly in specific segments rather than across the economy. “It’s not as if the entire economy is going to get hurt,” he noted, adding that AI could eventually deliver productivity gains even if near-term growth expectations adjust.

Prasad expects market reactions to AI-driven changes to occur faster through valuation adjustments, while broader economic effects will emerge gradually over time.

For the full interview, watch the accompanying video

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