Sood believes global and domestic factors are aligning well. With the US Federal Reserve expected to cut interest rates — possibly two or even three times — the global cost of capital is likely to ease. “The spread between US 10-year bonds and Indian 10-year bonds is at a record low, creating a very supportive environment for India,” he said, in an interview with ET Now.
Over the past 15 months, Indian markets have largely delivered flat returns, even as other global markets have rallied. Sood argues that this period of “zero returns” could set up India for a sharp recovery once earnings start to improve. “If earnings growth is delivered, market returns will follow,” he noted, highlighting India’s relative attractiveness among emerging markets.
Sood’s overall stance is cautiously optimistic. “This is not a market to go bargain-hunting in. But with earnings recovery and selective bets in healthcare, consumption, and innovative IT, investors can expect steady compounding ahead,” he concluded.
Valuations and growth
While some analysts worry about high valuations, Sood believes India’s market multiples can be justified. “We are a 14–16% ROE market. If you look at the long-term trend, earnings growth in India has been 12% on average, and Nifty returns have been the same. We expect 10–12% growth in the near term, with the best-case scenario being 14%,” he explained.
The outsized 25% earnings growth between 2021 and 2024 was an “aberration,” Sood said, as it came on a low post-Covid base. Looking ahead, he expects a return to steady growth, supported by domestic demand and policy measures.
Sector bets: Healthcare and consumers in focus
InCred’s portfolio reflects a defensive stance, with healthcare making up 29% of allocations. “We like CDMO companies that benefit from global pharma and biotech trends, along with diagnostics and hospital plays that are insulated from tariffs,” Sood said.
On the consumer side, he sees a revival led by rural India. Rising gold prices, higher rural incomes, GST cuts, and arrears from the eighth pay commission are expected to boost consumption. “We prefer rural consumer companies, especially in low-unit categories like two-wheelers, small cars, fans, and air conditioners. Demand here could surprise positively,” he added.
IT: Value plays amid disruption
Despite global headwinds, Sood sees opportunities in large-cap IT firms such as Infosys, Wipro, HCL Tech, Tech Mahindra, and TCS. “These companies are now more of a capital allocation play. With 3–4% dividend yields and strong cash balances, they offer value investing opportunities,” he said, pointing to Infosys’s buyback as an example.
At the same time, he stressed the importance of looking beyond traditional services. “The next decade belongs to product companies. We own firms like R Systems, which has expanded into generative AI, and Intellect Design Arena, which is taking its products global.”
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