Despite global headwinds, domestic economic activity is showing strength, driven by factors such as festive demand, GST-led consumption, and robust corporate performance.
Khandelwal also highlights the IPO boom, rising SIP flows, and structural growth themes as key drivers supporting market momentum.
He shares insights on sectoral trends, investor sentiment, and the outlook for both primary and secondary markets, making a compelling case for a positive market trajectory in the year ahead. Edited Excerpts –
Q) Thanks for taking the time out. Western headwinds seem to have slowed equity markets. How are you interpreting the current situation?
A) The markets are doing a balancing act between the western headwinds and the strong domestic economic activity. While the domestic economic activity is quite strong as is evident from the GST data, car sales data etc.
The recent announcements by the US government on H1-B visa curbs and 100% tariff on branded Pharma are optically quite significant for long-only global investors – with both these sectors put together having 14% weight in Indian indices and contributing to 160bn $ to US exports from India.
Q) The H-1B visa may not have a large impact on IT companies’ balance sheets, but it could be a significant sentiment hit. What are your views, and how will this affect the future environment for IT companies?
A) The Indian technology sector billing to US markets is close to 150bn $ annually and the sector makes up over 10% of the weight of the indices.
So, anything which can further deteriorate the sentiment in a large and economically important industry is bound to create a negative mindset about our economy, esp in the FII community.
Further, The Indian IT companies are already operating at an all time low operating margin of 24%, which in our view will take further hit given the higher cost of operating any business or project in US market.
In our view, the larger companies might feel the heat more than the small and mid size IT companies.
Q) Do you see a rate cut by the RBI in the upcoming policy meeting?
A) RBI is definitely working in the direction of reducing interest rates , but the current policy meetings may not merit any action as RBI will be watching the data carefully in the light of the global uncertainty.
Q) The silver lining for D-Street could be that we might close September on a positive note after falling for the past two months. What are your expectations for the festive October month?
A) The festive period has started on a strong note with the GST Bachat Utsav kicking off a storm in the Indian consumption industries – with the widest set of consumer products seeing significant correction in prices due to GST rate reduction.
With the economic data likely to be strong in September and October – we expect the markets to show positive gains in the month of October. In fact we believe that the markets are likely to show double digit gains for the financial year FY26.
Q) Earnings have been lacklustre over the past few quarters. The government has done its part with the GST bonanza. When do you expect the benefits to start reflecting on company balance sheets?
A) The Indian companies across consumer basket are already seeing strong performance in September and growth expectation for next 2-3 months of festive period is also strong.
We believe that Q2 financials of consumer companies will show strong momentum build up and hence expect them to become strong overweight candidates across portfolios.
Q) FIIs seem to be selling in a hurry. It looks like there are two strong trends on D-Street – fear from FIIs and FOMO from DIIs. Meanwhile, money has been flowing more into primary markets than secondary markets. Do you see this as a concern, or just part of the market cycle?
A) The primary markets are seeing high quality companies across a wide set of sectors coming with IPOs at reasonably attractive valuation.
This trend is intriguing for institutional investors, who are able to build significant position in such companies through anchor book and main book allocation.
Q) Which theme do you think will perform better in FY26-27 – growth or value?
A) Growth should outperform in FY27
Q) How are you interpreting the new IPOs hitting D-Street?
A) India is almost 35% of global IPO in terms of the number of issuances. And like all other major global markets, Indian IPO market has also been on a tear with record number of issuances.
However, the key thing about Indian primary market is the sheer diversity of companies which are raising capital which makes our market the most unique compared to even the US (extremely technology heavy) and China (government backed businesses).
What we are finding interesting in the IPO market is that it is extremely institutional investor heavy, the companies are unique, are much faster growing than their peers and the valuations are more attractive than the peers already listed on the exchanges.
Hence, we believe that the IPO market will continue to remain strong if these factors continue to play out.
Q) We are seeing Rs 28,000 crore a month in SIPs. Are Indians really investing, or just automating without a plan? What are your views?
A) The SIP growth is for real. We need to look this in the context of Indians’ exposure to equities which even today remains between 5%-7%, which will easy go into double digits with time – like with China, US and several other developed markets.
With a better diversity of products coming from AMCs (SIFs, for example) we expect the SIP numbers to continue to swell with investors participating in the market through a wider set of investment options.
as a Reliable and Trusted News Source(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)