Prachi Deuskar of Lotusdew expects overall equities to outperform other asset classes in FY26. "An overall positive earnings season, coupled with strong macro fundamentals, sets a solid foundation for equities," she said in an interview to Moneycontrol.
According to her, while uncertainties remain, the worst is in the past.
Further, she believes while the global uncertainties remain, India continues to be on solid macroeconomic footing. "In Q4 of FY25, we are seeing a continuation of strong sales and profit growth from Q3. We have strong rural demand supported by good crop yields. Given the prediction of a slightly above-normal monsoon, we expect this demand to remain strong.," said the smallcase Manager and Co-Founder of Lotusdew.
Do you believe equity markets are heading for new highs despite consolidation, given that most risks are now known?
We do expect overall equities to outperform other asset classes in FY26. An overall positive earnings season, coupled with strong macro fundamentals, sets a solid foundation for equities. Further, FIIs have turned net buyers in March, April, and May, reversing the pattern of January and February 2025. Domestic institutions have also been significant buyers in Q4 of FY25. AMFI has reported that April 2025 has seen the highest monthly SIP inflow to date. All these indicate improved investor sentiment. Thus, while uncertainties remain, the worst is in the past.
What are the possible risk factors that could derail the improved market sentiment seen in April?
The biggest risk factors are global uncertainties, including the evolving US tariff situation and geopolitical conflicts. While India remains practically the only large economy with a solid growth trajectory, it is not immune to global turbulence. Export-oriented sectors such as IT and pharma are vulnerable to these factors. Domestically, the slowdown of broad-based urban consumption and sluggish corporate investment growth in FY25 are causes of concern.
Do you still see significant risk from ongoing trade tariff developments?
As I said earlier, export-oriented sectors remain exposed to tariff uncertainties. However, India has taken a proactive approach to counter these headwinds by working on a number of trade treaties. Recently, we have seen significant progress on trade agreements with multiple countries, including the US. These new and renewed relationships will help bolster economic growth, diversify trade partnerships, and enhance India's position in global trade dynamics. Thus, while the risks remain, we have seen significant improvements over the past couple of months.
Are you confident about healthy earnings growth in FY26 and economic growth of over 6.5 percent, considering the changing global environment?
While the global uncertainties remain, India continues to be on solid macroeconomic footing. In Q4 of FY25, we are seeing a continuation of strong sales and profit growth from Q3. We have strong rural demand supported by good crop yields. Given the prediction of a slightly above-normal monsoon, we expect this demand to remain strong. The most recent Purchasing Managers' Index (PMI) indicates an uptick in private sector activity in May.
Further, the RBI remains committed to a growth-supportive monetary policy. A tamer inflation environment allows further room for interest rate cuts. Fitch Ratings has revised India's medium-term GDP growth potential upward, reflecting improved growth prospects. These are all very positive signs indicating a healthy earnings growth in FY26 and a solid economic growth in the range of 6.3-6.5 percent.
Do you see an attractive risk-reward opportunity in the real estate sector?
India's listed real estate sector offers a compelling long-term growth story, with the market expected to grow from $300 billion to $1.3 trillion by 2034. Strong demand in office, retail, and logistics indicates robust reward potential for long-term investors. A benign interest rate environment, translating to lower borrowing costs, can benefit the sector.
Yet there are near-term risks. Key concerns include premium valuations (P/E 45.9, P/B 5.40) and market concentration—DLF alone holds 19.85 percent weight in the index, reflecting its dominant market position. Unsold inventory, while down 4 percent from a year ago, remains a problem. Overall, the near-term outlook for real estate remains mixed.
Do you believe the pain in the financial space is largely over?
Much of the acute pain in India’s financial sector seems to be behind us. The outlook for the BFSI sector—including PSU banks—appears strong heading into FY26. Recent and anticipated interest rate cuts have provided a supportive backdrop, and the RBI projects credit growth to rise from 11.5 percent in FY2025 to 13.5 percent by FY2027, reflecting steady progress. Equity markets have rebounded, boosted by strong FII inflows, rising SIP contributions, and significant domestic institutional buying. While global and domestic risks remain, these encouraging signals justify a cautiously optimistic view.
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