Markets in wait-and-watch mode; festive consumption & manufacturing revival could drive next rally: Dikshit Mittal – News Air Insight

Indian markets may be stuck in a consolidation phase, but the foundation for the next rally is being quietly built. Talking to ET Now, Dikshit Mittal, Senior Fund Manager at LIC Mutual Fund, said investors should stay patient through the upcoming earnings season — as strong Q3 growth, festive consumption, and policy support could trigger an upward breakout later this year.

“Markets have been consolidating for nearly 18 months because of muted earnings,” said Mittal. “But from the third quarter onward, we expect earnings growth to accelerate and the market to resume its upward journey.”

Earnings momentum key for breakout

With mid-single-digit earnings growth and a soft cost of capital, Mittal said domestic liquidity remains strong — a major reason why markets have held firm despite weak global cues.

“The second-quarter results will be crucial,” he added. “By Q3, earnings and consumption trends could both improve.”

Consumption revival: Discretionary demand to lead

LIC MF has turned bullish on consumption and discretionary spending, supported by wage growth and GST-led tax cuts.

“Urban and rural wages are now outpacing inflation, which means real income is rising,” Mittal explained.
“With RBI’s liquidity measures, rate cuts, and GST benefits, high-value consumption — jewellery, automobiles, premium products — should see strong growth from the third quarter.”

Stocks like Titan, which reported a strong quarterly update, show that consumer appetite for premium goods remains robust despite inflation.

Manufacturing, EMS, and semiconductors: Next growth engines

Mittal also sees promising long-term potential in India’s manufacturing and electronics value chain, especially in import substitution and export-linked sectors.“Semiconductors, EMS, and precision manufacturing have strong visibility,” he said.

“These are asset-light, high-turnover businesses where India can gain global market share. Capex may not be massive, but profitability and revenue growth will remain healthy.”

Despite short-term tariff headwinds, Mittal believes the structural export story remains intact as global supply chains diversify.

Oil & Gas: Attractive for traders, not long-term investors

Commenting on the recent volatility in oil and gas counters, including IGL’s sharp move after Gujarat’s tax rejig, Mittal said the sector remains valuation-cheap but regulation-heavy.“Oil marketing and city gas companies face constant regulatory intervention,” he noted.
“They can offer trading opportunities in Q2, but taking a multi-year view on such a regulated space is difficult.”

He added that while Citi’s positive near-term outlook could play out, long-term investors should stay selective.

Outlook: Stay invested, focus on earnings turnaround

With liquidity stable, inflation easing, and policy tailwinds building, LIC MF expects markets to move higher in late FY26.

“Q3 could be the turning point,” Mittal said. “Investors should stay invested in quality consumption, manufacturing, and selective banking names to benefit from the next growth cycle.”