Daily Voice: Defence a multi-year play with potential for outsized returns, says Trust MF's Sandeep Bagla

Sandeep Bagla is the CEO of Trust Mutual Fund,

According to Sandeep Bagla of Trust Mutual Fund, with rising geopolitical risks in the region, there is a distinct possibility of increase in spending on defence in the coming years.

Hence, he sees defence as a multi-year play, a sector which could potentially result in outsized investment returns, but over the long term.

He is expecting inflation to be low over the next few months and rains to be normal as well, which are supportive for economic growth and corporate earnings. The picture is expected to be better after a couple of quarters in terms of earnings growth, the CEO of Trust Mutual Fund said in an interview to Moneycontrol.

Do you expect a significant pickup in defense capex this year? Do you still foresee a sharp rally in defense stocks?

With rising geopolitical risks in the region, there is a distinct possibility of increase in spending on defence in the coming years. We see defence as a multi-year play, a sector which could potentially result in outsized investment returns, but over the long term.

Do you expect further weakness in the rupee if the situation worsens from here?

The global economic scenario is highly uncertain. In the US, economists are fearing a situation lower growth and higher inflation – a situation that can be termed as stagflation. The policy prescription for stagflation is not clear, as rate cuts would spur inflation and rate hikes could hurt growth prospects. It is quite likely that global currencies can witness greater volatility and Indian Rupee could also get caught in the crossfire. If one imposes the cross border tensions, it is quite likely that Rupee can see some weakness.

What is your analysis of the corporate earnings announced so far? Do you see any major risks to FY26 earnings growth?

Earnings announced so far have been a mixed bag. With RBI reducing rates and turning the liquidity tap, there could be renewed vigour in the Indian economy. Global tariffs and geopolitical uncertainties could dampen earnings in the near future. We are expecting inflation to be low over the next few months and rains to be normal as well, which are supportive for economic growth and corporate earnings. The picture is expected to be better after a couple of quarters in terms of earnings growth.

Are there any specific sectors you would advise investors to bet on, especially after the ongoing March-quarter earnings season?

We at TRUST MF are bullish on a trend basis on themes like financialisation of savings, creation of physical assets, digitization and premiumization of consumption. Investors would do well to invest through growth oriented diversified equity MF schemes and remain invested over the medium to long term to benefit from the robust India growth story.

Are you cautious about the IT sector? When do you think would be the right time to start buying into the sector?

Given the uncertainties over global growth prospects, we are cautious on IT and our portfolios are slightly underweight on the sector compared to the index weightage.

Do you expect economic growth to be at, below, or above 6 percent for FY26?

We believe the structural drivers for growth are very much intact in India. We expect the growth to pick up, specially in the second half of the financial year. India should grow at a rapid clip, a tad above 6% this year.

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