Sailesh Raj Bhan, Chief Investment Officer – Equity Investments at Nippon India Mutual Fund, expects corporate earnings to grow 12-15% annually over the next three years, barring any major global disruptions. According to reports from CNBC TV18, he believes the first quarter earnings season marked the first broad-based improvement in corporate performance in several years. The fund house believes improving earnings and reasonable valuations have strengthened the case for Indian equities after two years of consolidation.
Foreign institutional investor (FII) selling has improved valuations across market capitalisations, particularly in large-cap stocks, as reported by CNBC TV18. Raj Bhan noted that valuations have corrected across largecap, midcap and smallcap stocks over the last two years, making quality businesses available at more reasonable prices. The market has undergone a broad valuation reset even as earnings have continued to grow, improving the overall risk-reward equation. He emphasized that when earnings rebound, the cycle surprises on the upside.
Among sectors, large private sector banks are identified as one of the most attractive investment opportunities, according to CNBC TV18 reports. Raj Bhan said many quality lenders are now trading at valuation multiples rarely seen in recent years, with some private banks trading at levels somewhat closer to PSU bank multiples. He also sees value emerging in consumer discretionary, including consumer durables, hotels and services, after a prolonged period of weak demand and valuation correction. Improving rural demand, tax benefits and company-led initiatives are beginning to support volume growth.
IT services remains one of the weakest-performing sectors over the last two years, but Raj Bhan believes the market has become overly pessimistic about its growth prospects, as reported by CNBC TV18. He argued that valuations do not reflect even modest revenue growth and companies that adapt their offerings around artificial intelligence could benefit as AI adoption expands. Regarding precious metals, he said the sharp gains seen last year have moderated, but gold and silver continue to play an important role in portfolio allocation despite not expecting outsized returns in the near term.
While remaining positive on the long-term outlook for the power and industrial cycle, Raj Bhan warned that many capital goods, power equipment and transmission companies already reflect optimistic growth assumptions, according to CNBC TV18. He said valuations in several industrial companies are priced to perfection after a sharp re-rating and advised investors to be selective. Within the broader power theme, he prefers power utilities, saying they continue to offer reasonable valuations despite growing electricity demand.
