Rajesh Bhatia, Chief Investment Officer at ITI Mutual Fund, believes India’s macroeconomic fundamentals are robust. “India is also the least vulnerable to US tariffs,” he said in an interview with Moneycontrol.
Bhatia noted that unless there is a major global risk-off event, Indian market valuations are likely to remain elevated.
He added that ITI Mutual Fund continues to remain positive on sectors such as telecom, banking, life insurance, consumer discretionary, engineering, and other capital goods, particularly companies linked to the power sector.
Q. What is your bet, real estate or real estate derivatives like building materials, etc.?
Real estate has certainly been on a clearer upward trajectory compared to, say, the cement industry. It continues to be on a strong upcycle, as measured by pre-sales growth, especially for organised players in the top cities. Companies in the sector remain confident about demand and their respective launch pipelines, and also highlight low inventory levels across cities. The only caveat is that the sector is highly cyclical, it’s a macro play, and valuations are no longer cheap.
Q. Do you think the RBI’s growth projection of 6.5% looks achievable and may not disappoint?
Yes, 6.5% looks quite achievable. In fact, expectations are that GDP will accelerate even further to over 7%, which will aid corporate earnings. The RBI must be commended for a decisive bazooka to drive growth. India’s macro conditions are strong, and a weaker dollar has given the RBI the space to take such a stance. Our fiscal deficit is being responsibly brought down, which reduces our fragility, though it does act as a bit of a headwind to growth.
The broad-based disinflation has given the RBI room to use monetary policy to accelerate growth. India is emerging as not just the fastest-growing economy in the world, but also among the least susceptible to macro accidents.
Q. Do you strongly believe that the peak of tariff uncertainty is behind us?
Honestly, the global macro environment has become quite unpredictable. What’s becoming clearer is that the US will likely retain some level of tariffs for the rest of the world, and a much higher level for China. It’s unlikely we’ll return to pre-Trump tariff levels. Given that former President Trump is still using tariffs as a negotiating tool, it’s unclear when things will settle. The risks to India remain largely global.
One of the most notable risks is the rising fiscal deficit and high borrowings of the US, a trend that continues unabated. It’s difficult to predict the timing, but the debt-level challenges for the US will only intensify going forward.
Q. Is India relatively protected from dollar-denominated debt? Do you expect Indian market valuations to remain elevated?
As stated earlier, Indian macros are quite strong. It is also the least vulnerable to US tariffs. Globally, there’s a trend of reducing exposure to US dollar assets, both fixed income and equities, which is contributing to a weaker dollar. This trend benefits emerging markets like India.
India also continues to benefit from strong retail flows into equity markets, including via mutual funds. So, unless there is a massive global risk-off event, Indian valuations are likely to remain elevated.
Q. Post RBI rate cut and liquidity infusion, which sectors look poised to do well in FY26?
NBFCs are direct beneficiaries of interest rate cuts, as is the real estate sector. Fortunately, Indian equity markets benefit from the sheer breadth of sectoral opportunities. We continue to like telecom, banks, life insurance companies, consumer discretionary, engineering, and other capital goods companies, especially those catering to the power sector.
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