According to ETMarkets reports, Jitendra Gohil, CIO – Listed Equities at Bajaj Alts, believes sectors such as electronics manufacturing, solar energy, power equipment, batteries and waste management are still in the early stages of a strong growth cycle. He also sees opportunities in defence, shipbuilding, infrastructure and aerospace, though he cautions investors about demanding valuations. Gohil describes this as an exciting time for fund managers as India is transitioning away from traditional market leaders such as FMCG, IT, and banking toward these emerging sectors. In an interview with ETMarkets, Gohil emphasizes that IPOs are providing investors with opportunities to participate in these emerging sectors and companies, though investors should exercise caution as valuations are generally demanding for many of these businesses.
As reported by ETMarkets, Gohil notes that 10-year yields in the US, Japan, and Germany have surged by 74 bps, 71 bps, and 54 bps, respectively, demonstrating India's resilience and effective economic management. Key growth indicators including credit growth, tax collections, auto sales, retail sales, quick commerce, and exports have shown significant traction. The domestic macroeconomic setup in H2 appears positive, suggesting Indian equities could perform better than in H1 2026. However, Gohil acknowledges that the bigger concern for India is geopolitics and the prevailing global narrative, noting that global capital flows are influenced by politics and momentum, although earnings and valuations remain important factors.
According to ETMarkets reports, Gohil indicates that a decisive return of FPI flows to India hinges on the successful conclusion of a trade deal with the USA. He notes that while Indian equity valuations are rich, this has been the case historically given the country's among the highest ROEs in the world, strong corporate balance sheets, and consistent low- to mid-double-digit earnings growth. The AI-led rally has benefited a select group of companies, but generating adequate returns on these investments in an environment of rising bond yields may prove challenging. Gohil believes India's PE premium is justified as it offers a very diversified and solid long-term growth story. Once FPIs return, there could be a brief period during which mid- and small-cap stocks underperform due to profit-taking, with liquidity shifting toward large-cap stocks.
As reported by ETMarkets, Gohil believes earnings growth could be revised upward in the near term, though private capex picking up pace may lead to weaker cash flows and margin pressure. He remains more bullish on economic growth outlook while remaining somewhat cautious on the earnings growth narrative. The market is increasingly rewarding companies with sustainable long-term growth prospects, even if near-term cash flows remain weak. Private capex is finally picking up pace, which is a positive sign for economic growth, though it can lead to weaker cash flows and margin pressure in the near term, coupled with heightened competition weighing on profit growth.
According to ETMarkets reports, Gohil describes this as a stock picker's market where investors should carefully evaluate management quality and assess long-term growth prospects before relying solely on valuation-versus-earnings arguments. He expects growth to be broad-based over the next 12 to 18 months, with potential rotation from expensive growth stocks toward reasonably valued large caps. However, investors should exercise extreme caution when pursuing growth stocks, paying particular attention to instances where insiders are reducing their holdings or where management teams are providing aggressive growth guidance. The market is currently experiencing significant euphoria around growth stocks, which may result in mispricing and excessive valuation multiples. Consumer discretionary companies could also start performing better ahead of the festive season, the Uttar Pradesh elections, and the implementation of the 8th Pay Commission.
