According to Preethi RS, Fund Manager at DSP Mutual Fund, the entire BFSI sector — banking, insurance, and capital markets — presents compelling entry points for long-term investors. As reported by The Economic Times, system credit growth is on track to reach 15% for the full year in FY26, which she describes as a healthy signal for lenders. Capital markets are also holding up well, with derivatives activity, mutual fund flows through SIPs, and net inflows showing signs of recovery. Even stock exchanges have benefited from elevated volatility, making them quiet performers in the current environment. On insurance, she acknowledges two to three years of regulatory-driven turbulence but expects that phase to wind down, which should unlock value across insurance names.
One of Preethi's key observations is the valuation derating of large private sector banks, which she argues has gone too far despite justified concerns about structurally lower growth rates. Using residual income models and Gordon Growth Model frameworks, her team finds large private banks trading at some of their lowest valuation levels in history — even after adjusting for lower growth expectations. As reported by The Economic Times, she noted that much of the net FDI weakness stems from profit-booking and IPO-related exits rather than a fundamental loss of confidence in India. She expects both FII and FDI flows to recover as valuations normalize.
Beyond large private banks, Preethi highlighted quiet but important trends among smaller and midcap banks. Since the RBI's Asset Quality Review process in 2015, these banks have delivered three to four years of consistent execution. Many are now led by professionals who moved from larger institutions like SBI and ICICI Bank, bringing stronger systems and processes with them. Because these banks do not feature in major benchmarks, they offer genuine alpha opportunities for active fund managers. She maintained that private banks hold a durable structural advantage through their investment in people, branch infrastructure, and liability franchises, giving them a 20 to 30 year runway that PSU banks still need to match.
According to Puneet Sharma, CEO and Fund Manager at Whitespace Alpha, CAT3 AIF, volatile markets create larger trading opportunities as price movement ranges expand. As reported by Mint, Sharma emphasizes that whether markets go up or down becomes secondary - the focus is on how wide the move is and how efficiently they can capture it through derivatives. The firm's approach combines equity exposure, high-quality debt instruments, and derivative-based strategies to create a portfolio that doesn't rely on market direction for performance. As reported by The Economic Times, Preethi noted that India VIX remains around 18, indicating uncertainty is present but not at low-volatility levels.
Sharma identifies consumption as a strong long-term theme in India supported by income growth and structural demand, as reported by Mint. However, he notes that IT sector may remain under pressure for some more time until there is more clarity on global demand and tech spending. The firm typically avoids strong sectoral bets, focusing instead on extracting alpha from market inefficiencies rather than directional views. Interestingly, Sharma suggests pharma looks underappreciated with more potential than current market positioning suggests, especially as global healthcare dynamics evolve. Preethi's analysis supports this view, noting that if global capital begins looking for alternatives to AI-heavy portfolios, India becomes an attractive destination offering 14% to 15% compounding potential.
