FIIs may turn positive faster than expected
A combination of global profit-booking and improving domestic earnings could drive higher FII inflows in the coming weeks, Subramaniam argues.
Hedge funds typically book profits between November and December, and this year, markets like China, Taiwan, and South Korea have delivered bigger returns than India—making them ripe for profit-taking.
India, which has been flat in dollar terms, could attract fresh allocations as FIIs rebalance portfolios.
Broker projections of 14–15% Nifty EPS growth next year further strengthen the case for higher foreign flows, he added.
DIIs set to rotate from winners to laggards
Domestic institutions have powered markets over the past year, driving rallies in:
- PSU banks
- Defence
- Capital market plays
- Autos
- Metals
But DIIs have stayed away from large pockets of the market, including IT, real estate, FMCG, and consumer durables. Subramaniam expects DIIs to book profits in over-owned themes and rotate money into underperformers with more attractive relative valuations.
“This is the period to rebalance portfolios towards a multicap strategy,” he said, adding that largecaps and midcaps have delivered similar one-year returns, while smallcaps have lagged significantly.
Private capex cycle set for revival
The biggest underplayed theme today, he says, is private sector capex, which is likely to revive in FY26 as consumption picks up and capacity utilisation crosses the critical 80% threshold.
Subramaniam expects strong opportunities across:
- Industrials
- Manufacturing & EMS
- Machinery and plant expansion plays
- PSU banks, which will benefit from MSME lending demand
This next capex cycle will differ sharply from government-led capex, he noted. Industrial capex will create broader, longer-term earnings visibility.
Tariff-impacted sectors could rebound if trade deal lands
With a US-India trade deal appearing close, beaten-down sectors such as textiles, leather exports and parts of pharma may see a sharp reversal once tariff uncertainty fades. Subramaniam prefers a 25–30% allocation to these export-dependent plays while keeping 75% focused on domestic themes.
Budget 2026: PPP push, capex support likely
Subramaniam expects government capex to remain flat at around ₹11 lakh crore, but the upcoming Budget may introduce fresh incentives for private capex—possibly through:
- Accelerated tax benefits
- New PLI extensions
- Public-private partnerships leveraging PSU land banks
“PPP could be the big buzzword of Budget 2026,” he said.