Daily Voice: BFSI sector remains very strong, pharmaceuticals looking positive at this moment, says Shriram Life Insurance CIO

Global Financial Institutions like IMF now projects global growth of 2.8% this year and 3% in 2026, down from the 3.3% it forecasted in January. However, at this stage it has stopped short of projecting a global recession, but they have said odds have risen from 17% in October to 30%. Even though there are apparent market turmoil and the dollar’s unusual weakness as bonds and stocks also fell, IMF officials mentioned they didn’t see signs of financial market stress yet.

In order to see further weakening of USD we have to wait and see after the 90-day pause of implementation of reciprocal tariffs ends how the tariffs or bilateral agreements between US and its main trading partners get settled. In case either the pause gets extended further, a significant breakthrough in negotiations happen, then possibility of further weakness of USD looks limited.

Are valuations looking attractive in capital market plays?

Valuations in the Indian equity markets have become notably more attractive compared to a couple of quarters ago - one of the key factors driving renewed Foreign Institutional Investor (FII) participation in recent months. As it stands, the Nifty’s 1-year forward price-to-earnings (P/E) ratio is at 20.9x, which is in line with its 10-year average which also is at 20.9x and below the 5-year average of 21.8x. This indicates that the index is trading at reasonable levels from a long-term valuation perspective.

At this point we need to be mindful that there are other variables, more specifically corporate earnings at play which can determine future valuations. We expect some cut in earnings estimates, but largely EPS cuts are factored in with earnings expected to pick up pace from second half of FY26e.

In summary, the Nifty is currently in a comfortable valuation zone, trading at levels that are either in line with or slightly below long-term averages. However, sustained support from corporate earnings will be critical in driving market performance over the coming quarters.

Do you see a rising risk from geopolitical tensions between India and Pakistan?

Any form of geo-political tension like war causes a lot of un-desired disruption to the country, re-drawing of Governments priorities apart from loss of military and civil lives and potential damages to national resources. Therefore, it’s disliked by nations and even markets. However, there is a strong expectation with-in the country that India may resort to a strong military action on Pakistan.

If this anticipated action blows up into a full-fledged war then certainly that’s a risk to the market. However, if it’s a limited military action without any significant retaliation then risk should be contained and it may not impact the market much is what we guess.

Do you foresee a higher chance of the Nifty 50 retesting April lows if tensions between India and Pakistan escalate?

Much will depend upon the intensity and duration of the war and if there are group of nations siding on either side then the economic momentum can get derailed leading to significant market corrections. However, this being very complex and sensitive matter its difficult to comment how actual things unfold.

Do you believe India can consistently maintain 6 percent annual growth over the coming years?

According to April 2025 edition of the IMF’s World Economic Outlook, India’s economy is expected to grow by 6.2 percent in 2025 and 6.3 percent in 2026, maintaining a solid lead over global and regional peers. The fundamentals of the economy are in place, the Governments expenditures are back which would stimulate the GDP growth. The focus of the monetary policy of Reserve Bank has shifted to supporting growth and ensuring surplus liquidity in the system.

With two consecutive rate cuts and change of stance to accommodative both the fiscal and monetary policies are growth supportive. MET department have forecasted a normal monsoon this year so we can expect a good Kharif crop sowing leading to rural economy growth as well. If urban consumption picks up which has been on a sluggish path, then the economic growth will be stronger and wider. However, these forecasts are assuming that there isn’t any war between India and any of its neighbours and even if there is its very limited military action from Indian side.

Which two sectors are you betting on for FY26?

BFSI sector remains very strong, being primarily domestic driven is immune from external volatility. Apart from this Pharmaceuticals, especially the CDMO/CMO segment is also looking positive at this moment. It’s getting consistent support from rising US and European outsourcing demand and weaker Chinese competition

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