Daily Voice: ‘Black swan aside, India’s bull run stays intact,’ Vikas Gupta on what’s next for markets

Fundamentally, it makes sense to say that the premiumization will drive growth faster compared to the sector as a whole. However, the caution as an investor is on the valuations. In most such cases, Mr. Market is already aware and has priced it in fully or even overdone it, most likely.

Do you continue to maintain a bullish outlook on gold-financing companies?

We never had an optimistic outlook for this segment since we are not confident that we understand these companies and their books properly. If in future we are able to understand the sector better then we will take a call on this.

What is your assessment of the ongoing September-quarter earnings season? Do you see any key indications for Q3 performance based on the results so far?

FY26 results are going to remain below earlier expectations but given the positive outlook we can infer from the increasing capex, which shows business confidence in the future demand, we are moving into the beginning of the next economic upcycle and should start seeing some impact in Q4 results showing what it is likely to be for FY27.

Given that there appear to be more tailwinds than headwinds, do you rule out a major downside in Indian equity markets from the current levels?

Yes, barring a black swan a major downside in Indian equities looks less likely. The Fed rate cuts and a US-India trade deal would trigger more FII inflows, the RBI rate cuts are likely to boost the domestic economy driven by more private and public sector capex and also drive consumer durables demand through cheaper loans.

The impact on the equity discount rates in the DCF models is likely to trigger repricing of Indian equities. Consumer demand is already benefiting from lower income taxes and GST. In the budget we should expect further measures including PLI incentives for exporters and help in finding alternative markets for sectors impacted by US tariffs. This is likely to happen even if there is US-India trade deal.

Do you expect the rally in US equities to continue, barring any potential black swan events?

US equities have lots of legs to continue given the Fed rate cuts which are expected, the AI Arms Race through Capex in AI Data Centers and the associated ecosystem, and the margin expansions through reduced personnel expenses driven by Human-to-AI job movements.

Even within the FAANGS or Magnificent 7 there are few companies which are still relatively undervalued. Outside the Mag7 within S&P 500 and S&P 400 midcaps and S&P 600 smallcaps there are at least 5% companies which could potentially generate double-digit returns and 2-3% companies which could generate extraordinary alpha.

Of course, one has to be extremely selective using some fundamentally rigorous process similar to our Scientific Investing Framework. So, in our opinion, the rally is likely to continue but could become more broad-based and hence the index investing might not be as rewarding as an active strategy.

What are your expectations from the upcoming Asian Summit, where the Presidents of the world’s two largest economies are scheduled to meet on October 30?

Definitely some sort of a deal is likely to be announced but I would put it in the category of a tactical temporary truce rather than a strategic deal. Both sides are interested in showing a deal has been reached and each will try to showcase to their domestic audience that it is a “WIN” for their country. But in reality the multi-decadal era of globalization has peaked and the pendulum is now swinging towards the opposite direction and is more about self-sufficiency. This swing towards self-sufficiency or AtmaNirbharta as we call it in Bharat is also likely to last for decades.

So, we will see things like China buying US soybeans, probably, and US reducing restrictions on semiconductor chips or equipment exports to China and China allowing more rare earths to be sent to US and US tariffs on China probably going below 30%.

All of this is temporary, while US will be building its alternative rare earths supply chains and alternate markets for soybeans. Similarly, China will be working hard on building its own semiconductor technologies where it still has dependence on the West.

So eventually we should see several alternative configurations of global supply chains, for example, BRICS/ASEAN etc. emerging in a few years. No amount of deal making is going to reverse this. These alternative networks which might be old or new will be reinvented with significantly more trade happening between them.

What is your view on the upcoming Lenskart IPO? Do you think it is fairly valued?

Haven’t looked at it in detail. On a PE basis it does look expensive but one should look at what the normalized margins would be in future when growth has stabilized or as compared to some global or domestic peers and then see if on that basis what would be the normalized PE ratio. So one has to analyze the fundamentals to get to a normalized income statement and then one has to estimate a sustainable growth rate and on that basis reach a valuation estimate and compare to what is being asked for. This applies to any IPO company and not just Lenskart.

If your estimate based on above process yields a value higher than the IPO pricing then one can consider investing and if not one can tell themselves to wait for it to get listed and that in the next few quarters or years one might get a chance to invest at even more attractive valuations and if not there are 1000s of other companies already listed.

Why not look at them with the same process of valuations I highlighted above or use the Scientific Investing Framework to make your life easier and less speculative. Of course, none of the comments should be taken as a buy or sell recommendation on the specific IPO.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.