Daily Voice: India a long-term winner of tariff war; bullish on NBFCs for growth, says Sandip Bansal

The sector has done well on the back of reasonable valuations on a relative basis and better-than-in-line earnings delivery from the results that have been declared so far. While historical valuations have been higher, so was growth. Earnings growth next year is likely to be tepid. Re-rating potential is also not high now, barring a few names. Select PSU banks may have better risk-reward. We prefer NBFCs as growth is higher and margins are more robust in a falling interest rate environment.

Has the current market rally convinced you that India has made a bottom, despite ongoing weakness and volatility in global markets? Is the worst behind us?

Given the noisy and fast-changing macro news-flow, it is even more difficult to say what the markets could do in the short term. From a fundamental standpoint, earnings growth is likely to be in double digits in FY26, also benefiting from the benign base of last year. It is increasingly seeming that India stands to be a long-term beneficiary of the ongoing tariff war. Domestic flows remain supportive. Valuations in many sectors and stocks have also become reasonable after the correction.

Do you think the market is anticipating a reduction in tariff rates, given the currently elevated levels?

Tariff implementation was paused to negotiate trade deals. Reports suggest that India is making good progress on this count, and a deal could happen in two phases over the next few months. Given India’s conciliatory approach and our strategic geo-political importance, it is likely that the final tariffs are not as high as initially feared.

Do you believe India’s GDP growth will fall within the 6–6.5 percent range for FY26?

We would think so. Growth in FY25 is likely to have been about 6.5 percent. The uncertain global environment is likely to impact exports. However, fiscal and monetary policies are growth-supportive this year. Lower taxes will aid consumption, rural demand is on an uptick, and urban demand could also turn in a quarter or so. Government spending, which was impacted by elections last year, is likely to accelerate this year. The RBI has cut interest rates, boosted system liquidity, and eased macroprudential norms.

Are the pharma and healthcare sectors better positioned compared to other areas of the market?

Valuations of domestic-oriented pharma businesses are attractive. The acute segment has a benign base from last year, and the chronic segment continues to do well. We also think that concerns about the export-oriented pharma businesses are overdone. Indian companies supply 40-50 percent of US generics requirements; alternative sources are likely to be far more expensive, and the ultimate impact on the US consumer could be high, especially given the essential nature of the product.

Which sectors do you hold a super bullish view on at the moment?

Manufacturing has a long runway for growth, and the sector is likely to be a key beneficiary of the ongoing tariff war. Infrastructure, especially the power sector, is likely to see continued investments. There has been a pick-up in ordering and government spending. We also like discretionary consumption, which should be aided by falling inflation, declining interest rates and a pick-up in loan growth in the retail segment.

Do you still find valuations stretched in the midcap and smallcap segments?

In spite of a good correction, quite a few mid and small-cap names still have high valuations, especially given growth concerns. However, we believe a more nuanced view needs to be taken, and there are high-quality names within the basket with sustainable and durable growth that offer good risk-reward.

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