According to Vikas Gupta of OmniScience Capital, FY26 has a high likelihood of double-digit earnings growth. It is likely to be driven by banks & financial services, housing finance, power, EPC/infrastructure, logistics, defence, and railways, he said in an interview to Moneycontrol.
He believes the tariffs could potentially result in inflation in the US due to cost increases and supply chain issues or bottlenecks at customs or ports. However, it is also possible that there is a potential recession, said the CEO and Chief Investment Strategist at OmniScience Capital.
Do you expect double-digit earnings growth in FY26? Which sectors will drive that growth, and is there any risk of downgrades?
Mr. Market seems to be struggling with a lot of uncertainty in terms of global trade stemming from Trump tariffs, wars etc. However, in our opinion, there is too much focus on sectors with uncertainty and less on sectors which have more clarity. In our opinion, FY26 has a high likelihood of double-digit earnings growth. It is likely to be driven by Banks & Financial Services, Housing Finance, Power, EPC/Infrastructure, Logistics, Defence, and Railways.
The risk of downgrades is always there. But that would happen if some unknown factor emerges. The known factors are already incorporated in terms of heightened uncertainty and in our opinion, things could actually be upgraded as clarity emerges.
Do you think the market has started shifting its focus from US tariffs to earnings and economic growth, considering the reduced concerns about tariffs for India?
Well, the focus should, ideally, be on the earnings and economic growth, but it is not yet fully incorporated in the fundamental forecasts. FIIs have started taking positions in markets other than US since the fall in those markets was overdone. Now, the allocation to EU and other developed markets is probably overdone and it is likely that further non-US allocation would be towards India.
In terms of valuations, India might look expensive compared to other emerging markets but it is also the highest growth market across all major economies, whether Developed or Emerging. This is why the money has started flowing in but the fundamental forecasts have not fully incorporated yet.
Are concerns about the US economy increasing? Do you expect more than two rate cuts in 2025?
The tariffs could potentially result in inflation in the US due to cost increases and supply chain issues or bottlenecks at customs or ports. However, it is also possible that there is a potential recession. Both of these are opposing forces in terms of interest rate actions to be taken by the Fed.
But, again, we think these risks are overblown and the focus should rather be on picking fundamentally strong companies which are available at a significant discount to their intrinsic values, what we call, supernormal companies at supernormal prices, whether in the US markets or Indian markets. In fact, lots of great companies have become available at great prices in the US because of these overblown concerns.
Which sectors will be in the spotlight for the new financial year?
We think Banks, including the PSU banks, will be in the spotlight. Besides these, Power and Housing Finance are also likely to find interest. Finally, we think that Defence and Railways will continue being the favourites of Mr. Market.
Have you started focusing on PSUs after the past months of turmoil?
Yes, some of them are available at reasonable valuations, especially banks. However, the other sectors, many are still in overvalued territory in our analysis. But they are at much better valuations than before.
Are you a buyer in the FMCG space?
Not really. We would rather play consumption from banks and housing finance side and not directly via FMCG which still looks expensive to us given their low growth rates. Maybe a significant further fall would trigger us to start looking at them actively.
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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