"While the recent market recovery signals growing investor confidence, I don’t foresee a V-shaped rally in the near term," said Anirudh Garg, Partner and Fund Manager at Invasset PMS in an interview to Moneycontrol.
According to him, the market may consolidate in a broader range before attempting new highs.
Even after FIIs have shown strong intent in the last leg of FY25, buying over Rs 32,000 crore in just the final few days of March, Anirudh Garg doesn’t expect an immediate flood of FII inflows. "I do believe that FY26 will gradually see sustained buying interest building up."
He remains constructive on sectors where both macro and micro tailwinds are aligning. In particular, "the financial sector — especially select private banks and diversified NBFCs — stands out due to compelling valuations and improved balance sheet strength," he said.
Do you see the market hitting new highs in the coming months? Which sectors are likely to participate in the next market rally?
The Indian equity markets have formed a strong short-term base after a sharp correction, supported by robust FII inflows — over Rs 32,000 crore in just the last few days of March. While this recovery signals growing investor confidence, I don’t foresee a V-shaped rally in the near term. The market may consolidate in a broader range before attempting new highs. That said, the long-term outlook has turned from stable to bullish.
Our view remains constructive on sectors where both macro and micro tailwinds are aligning. In particular, the financial sector — especially select private banks and diversified NBFCs — stands out due to compelling valuations and improved balance sheet strength. Additionally, we are actively tracking sectors aligned with the “China Plus One” strategy. India is well-positioned to benefit from global supply chain diversification, and sectors like CRAMS/CDMO (Contract Research and Manufacturing Services/Contract Development and Manufacturing Organization) in pharma, electronics manufacturing, and specialty chemicals offer structural long-term opportunities.
As bottom-up investors, we are selectively deploying capital into businesses with durable moats and scalable earnings potential across these emerging themes. The recent correction has created pockets of value, and we believe this market phase is more about accumulation than speculation.
Are you confident that FIIs will be strong buyers in FY26?
FIIs have shown strong intent in the last leg of FY25, buying over Rs 32,000 crore in just the final few days of March — a signal that interest in Indian equities is resurfacing. While I don’t expect an immediate flood of FII inflows, I do believe that FY26 will gradually see sustained buying interest building up.
Three factors support this view. First, the Dollar Index has cooled off from 110 to nearly 104 over the past three months, while the USDINR has also appreciated from 88 to 85.5 levels. A softer dollar typically bodes well for FII flows into emerging markets. Second, U.S. Treasury yields — particularly the 10-year and 20-year — have started easing, reducing the relative attractiveness of U.S. fixed income and pushing global investors to seek better real returns elsewhere.
Third, India’s equity valuations, especially in large caps, are currently compelling. The Nifty is trading at a PE of ~21.4x — below its long-term median of 23.5x — which makes it attractive for institutions typically allocating top-down. Historically, FIIs enter Indian markets via large caps before exploring broader themes, and we expect this playbook to repeat in FY26.
Are you overly concerned about a global growth slowdown?
A global growth slowdown is undeniably a risk we are tracking closely, especially with signs of policy-induced trade friction and persistent geopolitical tension. However, India remains one of the few economies relatively insulated from these headwinds. With GDP growth projected between 6.3% and 6.8% in FY26, domestic demand and government-led capex continue to provide a solid foundation for resilience.
A global slowdown acts more as a filter than a headwind, and India is emerging as a key beneficiary. Global clients are fast-tracking supply chain diversification, and the China+1 shift is translating into real capital commitments in Indian pharma, electronics, and precision manufacturing. Our portfolio is aligned with these structural export opportunities, especially in CDMO and specialty chemicals, where Indian players are gaining global share. Despite softer global demand, India’s cost-efficiency, and policy support through PLI schemes are driving capex visibility and export momentum. At home, strong service growth, stable governance, and digital infrastructure add resilience. In our view, the slowdown is reallocating capital toward scalable, efficient exporters — and India is increasingly where that capital wants to go.
Do you expect any surprises from the Trump Administration on April 2?
The upcoming April 2 tariff announcement from the Trump Administration is a significant event, but its long-term impact may not align with short-term market anxiety. Imposing broad-based tariffs risks backfiring on the US itself—higher import duties often translate to higher prices for end consumers, which can stoke inflation at a time when the Fed is already walking a tightrope. With supply chains still realigning, penalizing both China and India—the two largest manufacturing bases—could strain U.S. economic interests.
From India’s standpoint, many export sectors, including pharmaceuticals and specialty manufacturing, have a strong cost advantage. In several cases, companies can absorb moderate tariff shocks or pass them on with minimal margin disruption due to essentiality, global competitiveness, or favourable outsourcing dynamics.
What’s more important is the ongoing momentum toward a comprehensive India-US bilateral trade agreement, with negotiations progressing constructively. India is reportedly willing to cut tariffs on over 55% of US imports to preserve its $129 billion export relationship—showing intent to maintain trade stability.
While some near-term volatility is possible, we believe India's strategic relevance and economic pragmatism on both sides will ultimately lead to resolution. For investors, this phase calls for measured optimism and selective positioning across resilient export themes.
Are you bullish on private banks and large PSUs?
We maintain a constructive outlook on private banks and large PSU banks, driven by a confluence of policy and macro tailwinds. The RBI’s recent 25 bps rate cut—the first in five years—is a key catalyst. Lower borrowing costs are set to revive demand across retail and housing loans, accelerating credit growth and supporting bank profitability.
Additionally, the RBI’s $10 billion FX swap facility - aimed at enhancing rupee liquidity - further strengthens the banking system’s lending capacity. This infusion of durable liquidity, combined with a stable currency backdrop, improves balance sheet strength and encourages credit expansion.
Private banks, with their superior underwriting standards and digital leadership, are well-positioned to gain market share. Simultaneously, large PSU banks are entering a structurally improved phase—strengthened capital buffers, lower NPAs, and deeper rural penetration provide a strong base for sustainable growth.
The revision in Priority Sector Lending norms, particularly the increased cap on eligible home loans, gives both private and public banks fresh headroom in the mortgage space—a high-growth, secured segment.
With favourable monetary conditions, regulatory support, and improved asset quality cycles, the banking sector stands at an inflection point. We see selective private and large PSU banks as core long-term holdings in a structurally strengthening financial ecosystem.
Do you expect better earnings growth in Q4FY25 compared to Q3?
India, unlike China, is fundamentally a consumption-driven economy. A large share of our GDP is anchored in domestic demand, and we believe this engine is poised to accelerate further in the coming quarters. The RBI’s recent liquidity infusion through FX swaps, the first rate cut in five years, and adjustments in income tax slabs are collectively increasing disposable income—especially within the middle class. This will likely translate into higher consumer spending across segments.
As this demand revival plays out, we expect Q4FY25 to be incrementally better than Q3. Sectors such as autos, consumer durables, and discretionary consumption stand to benefit the most from this renewed momentum. Lower input costs and operating leverage will also support margin expansion across these segments.
While this quarter may not deliver a dramatic earnings spike, it represents the early stages of a steady recovery cycle. With markets being forward-looking, we believe they will begin to price in this improving earnings trajectory over the next few quarters.
Our focus remains on businesses with strong brand equity, pricing power, and scalable demand potential that are best positioned to capitalize on the rising consumption curve.
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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
