Saurabh Rungta of Avendus Wealth Management remains bullish on Indian equities despite global tariff-led headwinds. While tensions like the US-China trade spat may trigger short-term volatility, India's growth story is largely powered by domestic factors and is structurally resilient, believes.
He sees potential for an upside surprise in economic and earnings growth. "After earlier downgrades, earnings have stabilized. Nifty50 EPS has largely held steady in Q4FY25, suggesting that the worst of the cuts may be behind us," said the CIO at Avendus Wealth Management.
On the macro side, he believes discretionary consumption is picking up, which could gain momentum as the effects of monetary easing begin to filter through. "This may drive upgrades in earnings for consumption and rural-linked stocks," said Saurabh Rungta.
Are you bullish on the equity markets despite tariff-led uncertainty?
Yes, we remain bullish on Indian equities despite global tariff-led headwinds. While tensions like the US-China trade spat may trigger short-term volatility, India's growth story is largely powered by domestic factors and is structurally resilient. In fact, such global hiccups often create tactical entry opportunities rather than changing our long-term positive view.
Valuations may seem high with the 1-year forward PE at ~20.5x but falling bond yields over decades has caused the PE multiples to move up. In the last year, yields are down from 7.1% to 6.3%, hence, in terms of yield-to-earnings ratio, valuations are still within historical averages, suggesting markets aren't stretched when viewed through a relative lens.
We also see several fundamental tailwinds. India’s Q4 FY25 GDP growth came in at 7.4%, beating consensus expectations of 6.8%, driven by a sharp rise in government capex, especially in construction, boosting industrial growth. Agriculture also rebounded, growing 4.6% during the quarter. Adding to the positive sentiment, the IMD forecasts an above-normal monsoon at 106% of the long-period average, with favorable rainfall across most key regions. Except for the North-East, all zones are expected to receive average to above-average rains, supporting consistent sowing, strong kharif yields and a positive outlook for agri-linked sectors.
Do you believe liquidity will improve in the current financial year compared to the previous year?
Yes, we expect liquidity to improve in FY26. With inflation likely to stay within the RBI’s target, we foresee the monetary stance to remain stable to accommodative. RBI has already shown a calibrated approach to liquidity management, with the recent Rs 2.5 lakh crore VRR (Variable Rate Repo) auction, Rs 2.69 lakh crore dividend transfer to the government and Rs 2.4 lakh crore of OMOs (open market operations), reflecting a clear intent to maintain ample liquidity. As these measures play out, we expect the systemic liquidity surplus to materially improve over the coming weeks and months, supporting credit growth and market sentiment.
Do you also believe that capex and consumption are showing incremental improvement in FY26?
Yes, there are early signs of a synchronized recovery in both capex and consumption in FY26. Government capex remains the key driver, especially in infrastructure, defense and railways. In Q4FY25, GFCF (Gross Fixed Capital Formation) rose by 9.4%, largely due to strong central government spending. In just March and April 2025, the government spent over Rs 4 lakh crore on capex, up 65% YoY, amounting to nearly 40% of the full-year capex target. This also meant the revised FY25 capex target was exceeded by Rs 33,600 crore.
However, private capex is still cautious, with project announcements down 9% YoY to Rs 27 lakh crore, but we expect pickup towards the end of the year, due to improving consumption trends and ease in global uncertainty.
On consumption, rural demand is recovering, supported by an above-normal monsoon forecast and past tax cuts. However, the non-agri segments are still lagging. Two-wheeler sales and FMCG trends remain soft, but easing food inflation and stronger rural cash flows could trigger a more broad-based rural consumption recovery.
Do you see the possibility of an earnings and economic growth surprise in FY26? If yes, can you list the reasons?
We do see potential for an upside surprise in both. After earlier downgrades, earnings have stabilized. Nifty50 EPS has largely held steady in Q4FY25, suggesting that the worst of the cuts may be behind us. In fact, 52% of BSE200 companies reported a positive earnings surprise this quarter, up sharply from just 20% in the previous one. Barring FMCG and IT, which still face some earnings headwinds, most sectors are seeing resilient performance. Even in those two, the risk of further large estimate downgrades appears limited. As a result, our earnings bias has turned constructive, and we expect Nifty50 EPS growth of around 11–12% for FY26.
On the macro side, discretionary consumption is picking up, which could gain momentum as the effects of monetary easing begin to filter through. This may drive upgrades in earnings for consumption and rural-linked stocks. In financials, concerns around NIM compression are easing, asset quality remains strong and loan growth, especially unsecured, is improving.
Do you expect the pace of consolidation in the e-commerce sector to accelerate if high competition persists?
If intense competition continues, we do expect consolidation in the e-commerce sector to accelerate. Margin pressures from aggressive pricing, high acquisition costs and capital heavy logistics are making it tough for small players to stay afloat. At the same time, investor funding has become more selective, with greater emphasis on unit economics and sustainable profitability rather than pure growth. This then leads to strategic mergers, platform integrations or exits from the market. Larger, well-funded players with extensive ecosystems are better positioned to weather this and lead this consolidation wave.
We're already seeing signs of this, and as the focus shifts to scale and efficiency, consolidation could pick up, creating a more sustainable competitive landscape over the medium term.
Do you believe the Indian telecom market will continue to be a three-player market rather than becoming a duopoly?
The Indian telecom market is likely to remain a three-player market for the foreseeable future. Despite pricing pressures, the existing three major players have distinct strengths, ranging from spectrum holdings, reach or diversified models, thus sustaining competition.
Most importantly, government policies are also encouraging a competitive environment and prevent a duopoly. Given India’s large subscriber base and rising data demand, there’s room for multiple players to coexist, provided they focus on differentiation and customer experience. That said, smaller players may consolidate, but as of now the big three are well-positioned to maintain their dominance, making a true duopoly unlikely.
Do you expect telecom tower companies to continue trading at a discount to telecom service providers?
Telecom tower companies are likely to continue trading at a discount relative to telecom service providers, as they are akin to quasi InvITs. While they offer stable, recurring revenues and long-term contracts, their growth is tied to Telcos' capex cycles. Any slowdown or sector consolidation can impact their growth visibility. In contrast, telecom service providers, despite facing competitive pressures, have more diversified business models and upside from new services, pricing power and customer expansion, justifying a valuation premium. However, with 5G rollout gaining pace, rising tower infrastructure demand, we could see a narrowing of this valuation gap over time.
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