Speaking to ET Now, Singh downplayed the broader market impact of tariffs, noting that exemptions for sectors such as mobile phones and pharmaceuticals—heavyweights in market capitalisation—mean the hit is largely confined to smaller industries like textiles, footwear, and certain gems and jewellery exports.
“This is a small cost to protect everything else in the economy. Services exports, India’s biggest strength, remain untouched. So, it is best for investors to move on from this issue and not overthink it,” Singh said.
Neutral stance on Indian equities
Despite India’s strong growth narrative, Singh cautioned that markets remain “richly valued” and largely range-bound. With benchmark indices such as the Nifty 50 and Nifty 500 delivering flat returns over the past year, he expects more of the same in the near term.
“Markets had extraordinary returns of 20–30% from 2021 to 2024. What we are seeing now is just averaging out to bring longer-term returns closer to 12%. Investors should adopt a defensive stance,” he said.
He advised trimming exposure to sectors that have already seen outsized gains—such as defence, electronics manufacturing services (EMS), and solar energy—and instead leaning towards consumption, private financials, and healthcare. Singh also suggested allocating nearly 30% of portfolios to bonds or fixed deposits as a hedge against equity volatility.
IT sector: valuations still a concern
On the much-debated IT sector, Singh struck a cautious note. While services exports continue to perform well, he argued that valuations remain unsustainable.
“Before 2020, large IT companies traded at 15–18 times earnings. Today, they command 25–30 times, even though growth has slowed to 4%. These firms are being disrupted by AI, not leading the disruption. Multiples will eventually have to come down,” he observed.
Singh was even more sceptical about mid-cap IT companies, citing inflated valuations and limited scale.
Premiumisation remains the core theme
Within consumption, Singh underscored the growing divide between premium and mass-market demand. According to him, India’s top 10% of consumers continue to drive purchasing power, making premiumisation the most resilient theme across categories—from autos to real estate to staples.
“Premiumisation is the only place to be. That is where real consumption lies. If markets correct, these companies hold up better compared to the broader market,” he said.
However, Singh warned that even consumption plays carry frothy valuations. He advised investors to maintain a balanced allocation, keeping 50–55% in equities and the rest in debt and cash.
Bottom line
India’s markets are unlikely to deliver runaway gains in the immediate future. While consumption, healthcare, and private banks remain safer bets, investors should temper expectations and maintain healthy allocations to debt. As he put it: “In this market, even if you go 50–50, you are not losing too much.”
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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