India's Q4 earnings season has delivered a pleasant surprise with Nifty 100 profits growing 13% year-on-year, according to The Economic Times. The bulk of this strength was concentrated in the final quarter, marking a significant turnaround from previous years. As Pramod Gubbi, Co-Founder of Marcellus Investment Managers, explains, "We are reversing the situation from the last couple of years. Micro and macro have 'completely reversed." However, the earnings recovery faces headwinds from macro forces including rising crude oil prices, rupee depreciation, and inflation, creating uncertainty about the sustainability of this improvement.
Foreign institutional investors have withdrawn $5 billion from Indian equities in early 2026, with total FII holdings falling from $826 billion at the end of December 2025 to $660 billion by March 2026. According to Morningstar analyst Himanshu Srivastava, this represents a notable shift in foreign investor sentiment amid global risk aversion and valuation concerns. However, the outflows are primarily attributed to currency depreciation and market corrections rather than fundamental pessimism about India's long-term prospects. Of the $166 billion decline, only $5 billion represents direct outflows, with the remainder driven by currency weakness and market corrections.
Dipan Mehta, Director of Elixir Equities, advocates for selective investing in the current market environment, favoring sectors linked to power infrastructure, export-oriented manufacturing, and specialty chemicals. According to reports from The Economic Times, Mehta warns against overheated pockets such as hospitality and select data centre plays. He emphasizes that investors should remain invested in existing positions while exercising caution for fresh investments, particularly recommending a 5-10% correction before considering new entry points. Speaking to ET Now, Mehta shared his views on a wide range of sectors including data centres, hotels, tyres, transmission & distribution companies, and speciality chemicals, noting that opportunities are emerging in sectors that can benefit from global demand, currency depreciation, and India's expanding manufacturing competitiveness.
On KRN Heat Exchangers, Mehta acknowledges the company's strong position in the data centre ecosystem but warns against fresh investments due to premium valuations. As reported by The Economic Times, he stated that while the company is well-positioned in the data centre theme, the story is well-discovered and valuations are challenging. Mehta noted that India has very few listed companies offering direct exposure to the data centre opportunity, explaining the premium valuations assigned to ancillary players supplying equipment and products to the sector. Speaking to ET Now, he explained that while KRN is one of the best places in the data centre space, the valuations are a bit challenging and fresh investment does not make sense for existing investors can remain invested.
Discussing Coal India, Mehta described the stock as inexpensive but lacking meaningful growth momentum. According to The Economic Times, he highlighted that the company's volumes have remained static over 10-15 years despite its importance as a utility-style dividend play. Mehta noted that investors may continue treating Coal India as a dividend play unless the company delivers structural acceleration in growth rates of 12-14%. He also commented on the company's offer-for-sale discount, stating it appeared reasonable given the issue size and prevailing market conditions. Speaking to ET Now, Mehta highlighted that Coal India is cheap but the volumes just don't scale up, noting that if the company delivers materially meaningful growth rates of 12-14%, even if the stock price has gone up, investors could jump into it because then you would have earnings growth and PE derating.
Mehta acknowledged the remarkable performance of hotel and hospitality stocks since the pandemic, citing names like Indian Hotels Company, Lemon Tree Hotels, and newer listings including Ventive Hospitality and Leela. As reported by The Economic Times, he warned that geopolitical uncertainties and possible moderation in travel demand could create near-term pressure on the sector. While acknowledging the sector's strong run, he advised remaining invested but exercising caution for fresh investments, describing the current situation as a 'running train' that requires careful navigation. Speaking to ET Now, he noted that hotels have done very well since COVID, but he would be a bit cautious as it is like a running train, advising remaining invested but waiting for fresh investment opportunities. He also questioned the productivity levels of companies like Mahindra Holidays, noting that despite having a fabulous business with fantastic resort chains, the productivity in terms of what they can earn from these resorts has not reached its potential level.
Mehta maintains his strongest sectoral call for power transmission and equipment, citing multi-year growth visibility driven by India's renewable energy ambitions. According to The Economic Times, he highlighted that India is transitioning from 283 gigawatt to 500 gigawatt of renewable energy capacity over the next three-four years. He emphasized overweight positioning on the entire power equipment industry, including companies like KEC International, Kalpataru Projects International, and Transrail Lighting, noting that massive transmission investments are being pushed by the government. Speaking to ET Now, he highlighted opportunities across transformer makers and HVDC-linked companies, including multinational players such as Hitachi Energy, GE Vernova, Siemens and Bharat Heavy Electricals. He also noted that short-term earnings fluctuations should not distract investors from the long-term opportunity, emphasizing that massive transmission of power has to take place and India is going from 283 gigawatt to 500 gigawatt over the next three-four years in terms of renewable energy.
Mehta sees significant growth opportunities in specialty chemicals and export-oriented businesses, noting that companies are taking breakout quarters. According to The Economic Times, he highlighted that investors should watch for corrections before considering fresh entry points, noting that at corrections of 5-10%, 15% lower one could look at it in a more positive light. Speaking to ET Now, he emphasized that they are looking more and more at specialty chemicals and in their investment theme of export-oriented businesses, noting that something which they are seeing kind of breakout quarters taking place over there. He believes the depreciation of the rupee could support exporters such as Balkrishna Industries, especially as the company expands its product range and backward integration capabilities. Among the tyre makers, he highlighted Balkrishna Industries as a company worth tracking closely because of its export orientation and strong positioning in off-highway tyres.
