The biggest risk for the markets in the near term on the domestic front could come from the expected recovery in GDP growth or corporate earnings growth, said Mahesh Patil, the Chief Investment Officer of Aditya Birla Sun Life AMC in an interview to Moneycontrol.
On the global front, any delay in India’s potential trade deal with the US or a stronger US dollar could weigh on global risk appetite, impacting flows into emerging markets, including India, he added.
According to him, valuations for large-cap IT companies are now reasonable, and dividend yields of 3–5 percent make them attractive defensive plays.
What, in your view, could be the biggest risk for the market in the remaining part of the current financial year? Is inflation one of them?
The biggest risk for the markets in the near term on the domestic front could come from the expected recovery in GDP growth or corporate earnings growth. The current optimism is based on expectations of a sustained recovery in GDP and earnings growth over the next few quarters, supported by the festive demand momentum. If this buoyancy doesn’t sustain, particularly in consumer-driven sectors such as auto and discretionary consumption, it could dampen sentiment.
On the global front, any delay in India’s potential trade deal with the US or a stronger US dollar could weigh on global risk appetite, impacting flows into emerging markets, including India.
Do you believe that public sector undertakings (PSUs) fundamentally offer significant value?
Post-COVID, PSUs witnessed re-rating, supported by better governance, greater operational autonomy and improved fundamentals, especially in sectors like oil & gas, power and banking. However, over the long term, the share of PSUs in the overall market profit pool has declined, and that trend may persist after the rebound of the past couple of years.
That said, select PSUs still offer value for investors seeking moderate growth, strong cash flows, high dividend yields and relative safety. While they may not outperform on growth, they provide attractive income potential and downside protection.
Are you currently favouring PSU banks over private sector banks?
PSU banks have significantly outperformed private bank over the last three years, driven by steady credit growth and a sharp improvement in asset quality leading to very low credit costs. Large, well-capitalised PSU banks could continue to do reasonably well at current valuations. However, private sector banks have seen some valuation de-rating and a moderation in growth over the past few years, largely due to challenges in deposit mobilisation.
With liquidity conditions improving and deposit growth now picking up, private banks are well positioned to accelerate their lending activity once again. Structurally, we continue to prefer private sector banks for their better ROAs, stronger balance sheets, relatively favourable valuations compared to historical average, and ability to deliver sustainable higher than industry growth over the long term, while top-tier PSU banks can offer near-term value opportunities.
Do you expect strong growth in the IT sector next year? Are you accumulating IT stocks given their attractive valuations?
The IT sector this year experienced its slowest growth phase in five years due to reduced discretionary spending by global clients and the transition towards AI-driven models. However, recent deal wins and improving client confidence indicate that growth should recover in FY 2027, likely moving from low single digits to mid-to-high single digits. Valuations for large-cap IT companies are now reasonable, and dividend yields of 3–5 percent make them attractive defensive plays.
Do you foresee consistent upgrades in corporate earnings estimates, especially after analysing the September quarter results and management commentaries?
After nearly a year of earnings estimates being downgraded, the trend appears to be stabilising. Based on results reported till date, Nifty earnings for Q2 FY 2026 grew around 6 percent, broadly in line with expectations, while some of the broader market earnings (BSE 500) saw double-digit growth.
Management commentaries also suggest that the low-growth phase seen over the past few quarters has likely bottomed out. Going forward, we expect overall earnings growth to improve to the low-teens range over the next 12 months—a healthy recovery from the mid-single-digit growth seen last year.
Do you think the auto sector is poised to begin a new leg of its up-move soon?
Though the auto sector was struggling for the past one year, the recent festive season saw encouraging demand across four-wheelers and two-wheelers, supported by GST cuts and improving sentiment. The key to sustainability will be how demand trends hold up in early 2026.
If volumes continue to grow in the high single digits, the stocks could see another leg of up-move. Margins should also benefit from operating leverage as volumes rise, supporting earnings growth ahead. While the commercial vehicle segment remains sluggish with the recovery depending on how the economic activity picks up in the future, the overall auto sector appears well placed for a gradual recovery.
Are you bullish on digital-first companies?
Digital-first and new-age businesses are disrupting traditional sectors and capturing market share through innovation and technology. We remain selectively constructive on companies that have achieved clear leadership in their segments, demonstrated sustainable unit economics and reduced competitive pressures.
Such businesses, with a clear path to profitability and visibility of long-term growth, can create significant value over a 3–5-year horizon. We are, therefore, selectively bullish on a few high-quality disruptors that combine scale, efficiency and profitability.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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