In a conversation with ET Now, Upadhyaya said that the GST rate rationalization has already begun boosting sentiment and sales in the consumer and auto sectors, while valuations in banking have turned attractive after a long phase of consolidation.
GST reform to drive structural consumption boost
The government’s recent GST rationalization is acting as a strong tailwind for discretionary consumption, said Upadhyaya. The move has improved affordability and brought customers back into showrooms after a muted phase.
“We have seen people coming back to buy automobiles and consumer durables. The GST cut is a big structural reform that will support demand for years to come,” he said.
Over the past two weeks, the auto and consumer durable sectors have shown early signs of revival, with strong commentary from industry players. Stocks in these categories have already gained 15–20%, but Upadhyaya believes the uptrend still has legs for long-term investors.
“If you have a two- to three-year view, this is a good time to increase exposure. There might be short-term consolidation, but the sector’s fundamentals are improving,” he added.
La Niña risk manageable; Rural impact limited
Responding to concerns about the La Niña weather phenomenon possibly affecting rural demand later this year, Upadhyaya said its impact is likely to be limited.“Even if there’s a weak monsoon, the last two years have been excellent, and reservoir levels are well above average. So, the rural economy is better prepared,” he said.
He added that while sentiment could take a temporary hit, it would not derail the broader structural growth story for consumer durables and autos, given the strong monsoon buffer and ongoing fiscal support for rural India.
Banking sector entering recovery mode
Upadhyaya remains bullish on banks, which continue to form the largest allocation in Kotak’s largecap and flexicap portfolios.
“Most large banks and NBFCs have gone through a long consolidation phase. Valuations are now reasonable, and asset quality is benign,” he explained.
With credit growth expected to gradually pick up in coming quarters, he believes the sector is well-positioned for a recovery. The repo rate cuts have already been priced in, and further improvement in loan growth and margins could act as catalysts.
“We are likely to see sequential improvement in credit growth and a steady asset quality environment. This combination makes banking a potential outperformer in 2025,” Upadhyaya noted.
IT and healthcare: Selective bets, not aggressive calls
While Upadhyaya acknowledges slowing business momentum in IT, he said Kotak continues to maintain selective exposure to the sector — particularly in companies offering value in terms of pricing and fundamentals.
“Growth has moderated, but certain IT names are attractive from a valuation perspective,” he said.
In the healthcare space, especially hospitals, Upadhyaya believes in the long-term story but remains cautious due to stretched valuations.
“We already hold positions in hospitals, but we would only add if there’s a meaningful correction without any change in fundamentals,” he added.
Foreign flows could return once sentiment turns
On foreign institutional flows, which have remained negative through 2025, Upadhyaya said India’s valuation premium over other emerging markets has compressed, making it more attractive once global sentiment turns.
“India hasn’t seen the same inflows as other emerging markets due to trade negotiation concerns with the US. But once clarity returns, FIIs are likely to come back,” he said.
He also pointed out that muted corporate earnings over the past year have contributed to market consolidation, but the January–March 2026 quarter could mark the start of a broader earnings recovery.
Structural reforms set the stage for next growth phase
Upadhyaya summed up that India’s market story remains intact despite short-term volatility.
“Reforms like the GST cut and improving credit cycle are setting the stage for a multi-year growth phase. Investors should look beyond short-term noise and focus on the next three to five years,” he advised.
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