Daily Voice: Large private banks remain valuation-friendly; CIO George Joseph bullish on exchanges, depositories

George Heber Joseph is the Chief Investment Officer and Chief Executive Officer - Equity at ASK Invesmeent Managers

George Heber Joseph, the Chief Investment Officer and Chief Executive Officer - Equity at ASK Investment Managers, sees the financial services sector as well-positioned within the current market cycle, supported by strong credit trends, healthy balance sheets, and structural drivers of financialisation.

His preference remains for large private banks and market infrastructure players such as exchanges and depositories. Large private banks continue to offer valuation comfort relative to historical averages, according to him.

Meanwhile, once uncertainty around the India–US trade deal clears, market attention is likely to shift toward broader macro and domestic drivers, he said in an interview to Moneycontrol.

Do you expect the prospects for the IT sector to be strong in the coming calendar year after several quarters of consolidation?

The Indian IT sector has navigated a challenging environment with commendable resilience, supported by operational efficiencies and healthy deal activity in areas such as AI and vendor consolidation. However, the broader backdrop remains uncertain. Global macro pressures, geopolitical risks, and softer discretionary spending continue to weigh on client decision-making, leading to muted growth trends.

While structural themes like AI adoption and digital transformation offer long-term relevance, their near-term monetization remains limited. Valuations have corrected and appear reasonable relative to historical averages, yet earnings visibility is still closely tied to macro stabilization rather than technology narratives alone. In this context, we maintain a cautious stance, focusing on companies with differentiated capabilities and strong execution frameworks.

Do you believe we are in an AI boom rather than an AI bubble?

We view global AI developments primarily as a macro indicator rather than a direct driver for Indian markets. Recent strong results from leading chipmakers provide reaffirmation of AI demand, but the sharp swings in market reactions highlight growing concerns around sustainability and profitability. The early phase of broad enthusiasm is fading, giving way to a more selective environment where fundamentals matter more than narratives.

While investment levels are significant—hyperscalers are committing billions to AI infrastructure—their strong balance sheets differentiate this cycle from past bubbles. However, risks remain rising costs, execution challenges, and energy constraints could pressure returns. For India, which has lagged in this year’s AI trade, any moderation in global AI exuberance could redirect flows toward broader emerging markets. In our view, this is a structural trend, but one that will evolve with greater scrutiny and discipline.

Do you see a major trade emerging in the financial space going forward? What is your order of preference within the sector?

We see the financial services sector as well-positioned within the current market cycle, supported by strong credit trends, healthy balance sheets, and structural drivers of financialisation. Our preference remains for large private banks and market infrastructure players such as exchanges and depositories.

Large private banks continue to offer valuation comfort relative to historical averages, alongside stable asset quality and consistent earnings delivery.

In capital markets, exchanges and depositories stand to gain from rising market cap-to-GDP ratios, deeper retail participation, and structural growth in demat accounts.

Overall, the sector combines cyclical tailwinds with structural themes, making it a core allocation in our portfolios at ASK Investment Managers, with emphasis on scale, governance, and execution strength.

Do you think the finalisation of the India–US trade deal will form a solid bottom for the market?

The finalisation of the India–US trade deal is undoubtedly a positive development for sentiment, as it reduces uncertainty around tariffs and strengthens long-term economic ties. However, markets rarely hinge on a single event. Broader factors—such as global growth trends, liquidity conditions, and domestic policy signals—will continue to play a larger role in shaping market direction.

While the deal may provide near-term stability and support sectors linked to trade and technology, it should be viewed as one piece of a much wider macro puzzle rather than a definitive bottom for equities.

What will be the major triggers for the market once the uncertainty around the trade deal clears?

Once uncertainty around the India–US trade deal clears, market attention is likely to shift toward broader macro and domestic drivers. Key triggers include policy signals from the upcoming Union Budget, trajectory of global interest rates, and corporate earnings momentum, particularly in sectors linked to consumption and investment.

Additionally, credit growth trends, capital expenditure revival, and continued financialisation of savings could reinforce sentiment. Global liquidity conditions and commodity price stability will also play an important role in shaping risk appetite. In short, while the trade deal may remove one layer of uncertainty, the next phase for markets will be driven by fundamentals rather than a single event.

Are you confident that the earnings upgrade cycle will pick up pace with the announcement of the December-quarter results?

The December-quarter results will provide important signals on demand trends and margin resilience, but the broader earnings trajectory will depend on macro conditions and sector-specific dynamics. Current indicators suggest stability in key areas like financials, while commentary across industries points to a gradual improvement rather than a sharp inflexion.

Our framework anticipates that any meaningful acceleration in upgrades is more likely in H2FY26, supported by policy tailwinds and improving sentiment, though this remains contingent on broader economic conditions. In short, the upcoming quarter is expected to set the tone rather than mark a decisive turning point.

Do you expect the Federal Reserve to proceed with a rate cut in the December policy meeting, even though Fed officials currently hold mixed views?

The upcoming Federal Reserve meeting remains a focal point for global markets. Recent data points—such as weaker US consumer confidence and signs of labour market strain—have fuelled expectations of policy easing, with CME FedWatch indicating a high probability of a 25 bps cut.

At the same time, Fed officials hold divergent views, reflecting the tension between inflation stability and rising unemployment. While strong voices within the Fed advocate for deeper cuts, the decision will ultimately hinge on incoming labour and inflation data. In our view, the probability of a cut is elevated, but it should be seen as part of a broader policy recalibration rather than a definitive turning point for risk assets.