Rajguru told ET Now that the Indian market has been in a consolidation zone for nearly a year, with the Nifty trading around the same levels as September 2024 and mid- and smallcaps significantly lower. Globally too, India has underperformed—mainly due to six straight quarters of anaemic corporate earnings.
Earnings momentum to strengthen from FY27
Despite subdued earnings so far, Rajguru expects a sharp reversal.
- Nifty earnings grew just 5–6% in FY24
- FY25 may end with 7–8% earnings growth
- FY27 is expected to deliver 15%+ growth, marking a decisive shift in trajectory
“With earnings set to accelerate, this is the time to add Indian equities to portfolios,” he said.
Top sectors to buy: Banks, consumption and consolidated industries
Rajguru sees strong opportunities across three major themes:
1. Banking & financials
Earnings growth for banks is expected to remain strong, with mid-tier banks likely to outperform as credit growth rises and asset quality stays healthy.
2. Consumption & discretionary spending
Government stimulus—via tax cuts, GST rate reductions and RBI rate cuts—will keep more money in consumers’ hands. Discretionary consumption and rural demand are expected to improve further.
3. Sectors that have undergone consolidation
Industries like aviation, telecom and cement have seen reduced competitive intensity, improving pricing power and margins.
Auto sector entering multi-year upcycle
Automobiles, after nearly a decade of sluggishness, are at the start of a new growth cycle, Rajguru noted. GST cuts, falling EMIs and a strong rural economy are supporting demand.
- Passenger vehicles are his top pick.
- Two-wheeler makers with strong EV plays also stand out.
- M&HCVs show early signs of revival.
IPOs: High valuations but positive long-term impact
Rajguru declined to comment on specific IPOs but said the surge in primary market activity is healthy for India’s capital markets.
New-age companies in solar, digital platforms, consumer tech and manufacturing are deepening market breadth and offering private equity funds strong exit opportunities—encouraging future investment flows.
MPC outlook: Rate cut possible, but timing uncertain
On the upcoming RBI policy, Rajguru said a rate cut may be delayed due to strong GDP data, but a 25 bps cut could still materialise later in the February meeting.
For banks and NBFCs, he expects:
- NIM compression to stay contained
- Credit growth to accelerate, led by large banks and high-quality NBFCs
- Credit costs to remain low
“With credit growth picking up and margin pressure easing, lenders with stronger growth engines will outperform,” he added.