Banking, Consumption, E-commerce and Healthcare could be key investment themes for 2026: Kotak AMC’s Harsha Upadhyaya

Banking, Consumption, E-commerce and Healthcare could be key investment themes for 2026: Kotak AMC’s Harsha Upadhyaya

Banking, consumption and healthcare are set to be key investment themes in 2026 and beyond, according to Kotak AMC CIO Harsha Upadhyaya. He was speaking as a part of Kotak AMC’s Market Outlook 2026.

Upadhyaya said the banking and financial services sector remains his top conviction. “We believe that this is going to be a sector to watch out for in 2026,” he noted, adding that the industry has already experienced “a fairly good amount of consolidation” and that “some of the stocks in the sector have started to outperform.” He expects that trend to continue into 2026.

He pointed to clear signs of fundamental improvement. “The credit growth has started to improve and we believe that over the next six to eight quarters, this is going to inch up further,” he said. He added that asset quality continues to be very strong, while banks’ return on equity “finally seem to be approaching that 15% mark which has always been elusive.” According to him, no significant issues are expected on the asset quality side across financials, and as growth returns, “you should see better performance on the stock market as well.”

On consumption, Upadhyaya said that “there has been almost 1.4 to 1.5% of GDP boost that has come for consumption in various policy measures.” With per capita income rising, he asserted that “discretionary consumption will be the area to look forward to.” He added that the shift toward digital channels is structural. “Online penetration is going to increase and that is where we believe e-commerce and quick commerce will be the areas to look forward to,” he added.

He also highlighted a broad upgrade cycle. “We are seeing the upgrades or the premiumisation in every category,” he said, noting that many of the strongest opportunities lie in areas not traditionally classified as consumption. “Travel, tourism, aviation, etc., are also the ones which are going to see this increase in discretionary spend and that could actually give better upside to investors rather than the traditional consumption which is FMCG.”

In automobiles, he said India’s penetration levels are still one of the lowest in Asia, in the world and that rising incomes will accelerate demand. “Every household would want to have some vehicle for transportation needs,” he said, pointing out that public transport limitations will keep personal mobility high. The recent GST cut, he said, is “again a positive for this segment,” he said.

A notable shift is emerging from rural India. “The per capita, average per capita income for rural households is also crossing that 2000-dollar mark now, which means that over the next 5–10 years, the discretionary consumption from rural India could also be much stronger,” he said.

Discussing digital retail, Upadhyaya stressed that the debate is no longer about viability. “I do not think there is any question in terms of whether those business models are going to remain,” he said. “It is more about how quickly some of these businesses will turn more profitable, what will be the kind of growth. We continue to be very, very positive on quick commerce and e-commerce in general.”

Healthcare is the fourth theme. “India has been at the forefront of pharmaceuticals,” he said, citing both domestic demand and export strength. With an ageing population, rising lifestyle-related diseases and government spending on health and education, he described the sector as benefitting from “various tailwinds.” While pharmaceuticals have underperformed recently, he argued that “the valuations have also seen a bit of consolidation,” creating opportunities for long-term investors.

Looking ahead to earnings, Upadhyaya said the short-term weakness is likely to give way to a broad-based revival. “We believe that cyclically the earnings will rebound in the second half and will continue into financial year 2027 as well,” he said. While the first half of FY26 has been “very anemic,” he expects the second half to deliver double digits, with full-year earnings close to double digits. He added that FY27 and FY28 should see earnings “close to mid-teens.”

He expects the recovery to be widespread rather than concentrated in a handful of industries. “It is not an expectation that only few sectors are going to drive that earnings growth recovery. Most of the segments are expected to deliver a reasonable pickup in terms of earnings growth over the next several quarters,” he said.

Upadhyaya concluded that after a nearly year-long consolidation phase, these drivers should help steer markets into their next growth cycle.