“The markets have gone through a much-needed time correction after the strong rally of the past few years,” Kumar told ET Now. “A large part of that correction is now behind us, and the green shoots of recovery are visible.”
He added that the earnings downgrade cycle has bottomed out, with the upgrades-to-downgrades ratio turning flat from deeply negative levels earlier this year. “The government’s fiscal measures and RBI’s supportive stance are helping put a floor on corporate earnings,” he said.
Earnings stability could revive FII flows
According to Kumar, the shift in foreign investor sentiment will follow once India’s corporate earnings show signs of improvement.
“FIIs have been net sellers through much of the year, but as the earnings picture improves and global central banks turn dovish, we could see inflows returning,” he said.
He also pointed out that India’s valuation premium over emerging markets has normalized. “We’re now at par with EM peers, and that makes India a far more attractive allocation opportunity for global investors.”
Quant strategy focuses on low volatility, earnings quality
Explaining his quant-driven investment approach, Kumar said Axis MF’s model-based strategy analyses different styles — growth, value, momentum, and low-volatility — to determine the best-performing combinations.
“This year, the low-volatility style has been the best performer, while growth and quality have lagged,” he said. “But as earnings stabilize, these fundamental styles are likely to come back into favour.”
Autos, staples and financials among top sector bets
On the sectoral front, Kumar remains constructive on autos, financials, and consumer staples.
“We had exposure to autos even before the GST cut announcements, but we have added to our positions since then,” he said. “We’re focused on market leaders in both two-wheelers and four-wheelers.”Consumer staples, he said, are starting to see earnings upgrades after a long lull. “Valuations have moderated, and companies are now more focused on driving growth rather than just protecting margins,” he noted.
Kumar also remains bullish on financials across categories — PSU banks, private lenders, and asset management firms. “Lending activity remains strong, and capital market plays offer structural growth potential,” he said.
Underweight on IT as sector faces visibility issues
While technology stocks have lagged, Kumar prefers to stay cautious for now.
“We continue to remain underweight on IT because earnings visibility there is weaker compared to autos or financials,” he explained. “Our process is data-driven, so as soon as we see a turnaround in the numbers, we’ll adjust our positions accordingly.”
Themes with long-term promise: Power, tourism, and capex
Among structural themes, Kumar highlighted power transmission & distribution (T&D) and tourism-related plays as areas with strong medium-term potential.
“These are sectors that benefit from both policy tailwinds and improving demand trends,” he said. “We’ve been positive on them even before the recent GST and tax-related announcements.”
‘Next market phase will be earnings-led’
Summing up his Samvat 2082 outlook, Kumar said the next phase of the market will be driven by earnings growth rather than liquidity flows.
“Investors should focus on sectors with sustainable visibility, sound balance sheets, and positive earnings momentum,” he advised. “After the time correction we’ve seen, valuations are far more reasonable across largecaps and quality midcaps.”