Daily Voice: Nimesh Chandan of Bajaj Finserv AMC bullish on consumption sectors for next 5 to 10 years, optimistic about BFSI

Are you bullish on the BFSI space?

Yes, we remain optimistic about the BFSI sector. We've already witnessed a supportive monetary environment, with two interest rate cuts implemented and potentially two more on the horizon. This trend bodes well for financial services companies, as lower interest rates tend to reduce borrowing costs. NBFCs are poised to benefit immediately from this easing.

Additionally, we expect credit growth to pick up, supporting the banking sector through the remainder of the year. It's worth noting that BFSI underperformed last year, and currently, many companies in this space are trading at or near their 10-year average valuations. This creates a compelling opportunity for both growth and potential re-rating in the sector.

Is this the right time to add consumption and healthcare sectors to the portfolio?

I am very bullish on consumption sectors for the next 5 to 10 years. There are structural drivers like demographics, rising per capita income, etc, for the sector. There are now cyclical positives too. Fiscal policy is now more demand-oriented. The tax benefits will start showing their positive impact hereon. Monetary policy is also accommodative, so we will see the benefits of better liquidity and lower interest rates.

I am optimistic about everything from daily necessities and food delivery to real estate. Some alcohol, beverages, and ancillary industries to real estate also have notable positive outlooks. Although they have been lagging for the last 2-3 years, these industries have underperformed, and there are multiple catalysts this year.

Healthcare is inherently a non-cyclical sector, and our approach here is primarily bottom-up. We're particularly optimistic about the CDMO (contract development and manufacturing organisation) space, which stands to benefit from developments like the US Biosecure Act and the China-plus-one strategy. This has led to a noticeable uptick in inquiries directed toward Indian companies.

India also plays a crucial role in supplying cost-effective generic medicines to the world, reinforcing its position as a dependable partner. While there’s some near-term uncertainty around tariffs, we expect valuations in the sector to normalize once there’s greater clarity.

Beyond that, the runway for growth in generics remains significant. Across pharmaceuticals, diagnostics, and hospitals, Indian healthcare companies are demonstrating consistent performance and delivering solid numbers. Over the next two years, I believe CRAMS and CDMO, in particular, will be standout growth drivers.

Do you strongly believe that emerging markets (EMs) will outperform developed markets in the current environment?

EMs have underperformed in developed markets for a decade now. Last year, we were seeing some signs of a pickup in performance but then Trade Tariff fears have led to a sharp fall.

Ideally, when interest rates are moving down, and US Dollar is also depreciating, Emerging economies get an opportunity to provide stimulus to their economies. It is difficult to generalize how all EMs will perform. However, India is likely to do better. The trade tariffs are a relative game. In the current state of affairs, India will benefit as its competitors get taxed at a higher rate. India is also a more domestic-driven economy and hence will show resilience towards global uncertainties.

Do you believe earnings performance will remain strong going into FY26?

Towards the end of Q1 FY25, we observed a trend of earnings downgrades as the economic outlook appeared somewhat sluggish. However, the second half saw a notable pickup in GDP growth, which seems to have halted the downgrade cycle for now. Looking ahead, a common theme emerging from sectoral conference calls is growing optimism, most industry leaders are guiding for a stronger FY26 compared to FY25. The exception remains sectors with significant international exposure, such as IT, where global uncertainties continue to weigh on the outlook.

Do you still see recession and inflation risks for the United States? Do you expect US bond yields to move toward their January highs?

The recent US-UK Trade deal and lowering of reciprocal tariffs for imports from China is positive news for US inflation. Tariffs can still be headwind to consumer spending and heightened uncertainty around trade policy is likely to dampen business investment.

Recession risks remain but slower growth is more likely to be an outcome as fiscal impulse and stable financial conditions are likely to support the economy.

The US yields are in a very volatile zone beyond the growth-inflation considerations. It’s about repricing the risk premium market required for possible dollar depreciation and fiscal deficit rises. Yields already are very near to January highs; in fact, longer bond yields are at levels last seen in 2007.

Do you think the RBI has enough room to cut interest rates further in the upcoming policy meetings?

The Reserve Bank of India (RBI) has recently made significant downward revisions to its Consumer Price Index (CPI) inflation forecast. For the remainder of FY26, CPI inflation is expected to remain below 4 percent. The overall inflation outlook appears favourable, supported by easing global commodity prices and a forecast of surplus rainfall during the southwest monsoon season.

Additionally, the decline in the US dollar index and anticipated rate cuts by the Federal Reserve create further room for monetary easing in India.

Looking ahead, there are strong odds of a further 50-basis-point rate cut. Given the domestic growth-inflation dynamics, a more accommodative monetary policy stance is warranted to support economic momentum.

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