Rakesh Vyas, the CIO and Portfolio Manager at Quest Investment Advisors is betting on pharma and specialty chemicals sectors as contrarian plays in the year ahead.
Concerns around US tariffs and the global inventory cycle have weighed on sentiment, but India’s position as the “Pharmacy of the World” provides a strong structural cushion, he reasoned.
According to him, the precious metal (gold), which delivered exceptional returns in the last one year, is unlikely to remain a top-performing asset in the year ahead. "Key global uncertainties — including trade and geopolitical risks — begin to ease, precious metals could lose some of their shine," he said in an interview to Moneycontrol.
Do you believe the worst is behind us now?
The last one year was marked by multiple idiosyncratic challenges — including an unstable US tariff stance, geopolitical tensions (particularly in South Asia and Middle East), a sharp slowdown in corporate earnings, and a steep rally in precious metals. Consequently, market returns remained moderate.
As several of these disruptions begin to normalize, the year ahead is expected to deliver healthier stock returns — likely in line with the long-term average range of 12–15 percent.
Do you expect the year ahead to be significantly better for the markets, especially after the modest 4–5 percent growth seen in Samvat 2081?
After four years of strong market performance, the last one year was a year of consolidation, characterized by persistent FII outflows and muted earnings growth, partly cushioned by steady domestic inflows.
In the year ahead, corporate earnings growth is projected to rebound sharply to 12–14%, which should not only lift market sentiment but also encourage foreign investors to re-enter Indian equities as growth visibility improves.
What are your top five wealth-generating themes for the year ahead?
Coordinated policy interventions by the Government and the RBI are expected to fuel robust growth across several sectors. Key wealth-generating themes include:
** Consumer Discretionary, driven by a sustained rise in consumption and household spending.
** Retail Lending, as credit growth accelerates on the back of improving consumer demand.
** Private Capex Revival, supported by improving capacity utilization and corporate confidence.
** Pharma and CRDMO, where the resolution of US-related trade uncertainties should revive export momentum.
** Above all, a portfolio strategy that remains “Agile with Growth and Patient with Value” should be well-positioned to create long-term wealth.
Most of the above sectors are likely to witness strong earnings momentum from CY26, translating into meaningful stock performance.
Are you confident that gold will continue to be a top-performing asset class in the year ahead, given the current global environment?
Precious metals (especially Gold) delivered exceptional returns in the last one year, supported by elevated geopolitical tensions, a weaker dollar, strong central bank purchases, and supply constraints. However, as key global uncertainties — including trade and geopolitical risks — begin to ease, precious metals could lose some of their shine. Thus, gold is unlikely to remain a top-performing asset in the year ahead, unlike in the previous year.
What is your contra bet — a segment or idea that others might be overlooking?
The Pharma and Specialty Chemicals sectors — with the Nifty Pharma index down about 4 percent in the last one year — appear ripe for a turnaround. Concerns around US tariffs and the global inventory cycle have weighed on sentiment, but India’s position as the “Pharmacy of the World” provides a strong structural cushion.
Moreover, the global realignment of supply chains, particularly in the CRDMO and specialty chemicals space, represents a multi-year growth opportunity. Patient investors could be well rewarded for taking a contrarian stance here.
What could be the biggest surprise for the equity market in the year ahead, if any?
The most significant positive surprise could come from a strong comeback of foreign institutional investors (FIIs). Over the last several quarters, weak earnings growth and elevated valuations prompted persistent FII outflows. However, with growth visibility improving and corporate profitability expected to pick up, FIIs may meaningfully return to Indian markets — potentially driving a valuation re-rating.
Many experts anticipate an earnings recovery from Q4 FY26 onward and GDP growth reaching 7 percent in FY26. Do you agree with this outlook?
Yes, the backdrop appears conducive for a strong earnings recovery from Q4 FY26 onward. The combination of reduced income taxes, lower EMIs due to interest rate cuts, liquidity infusion, and GST rate reductions should meaningfully boost consumption-led sectors.
For the BFSI space — which constitutes nearly one-third of market — margins have been pressured by front-loaded rate cuts and weak credit growth. However, as NIMs bottom out by Q3 FY26 and benefits from deposit repricing and CRR cuts kick in, profitability should improve. A recovery in BFSI alone could meaningfully drive overall earnings momentum.
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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
