Daily Voice: Technology may outperform financials sector, gold prices to remain elevated in 2H2025, says LIC MF's Yogesh Patil

Yogesh Patil is the CIO Equity at LIC Mutual Fund AMC

According to Yogesh Patil of LIC Mutual Fund AMC, technology stocks may outperform financials, primarily led by relative valuation multiple improvement.

The technology sector's growth hinges significantly on the economic outlook and trajectory in the US, where clarity should emerge as tariff discussions with other nations progress, he said in an interview to Moneycontrol.

He believes with robust domestic and foreign liquidity, equity markets are anticipated to perform well over the medium to long term. Investors should prioritize long-term wealth creation and not be overly concerned with short-term fluctuations, he advised.

On the non-income-generating commodity like gold, "several factors suggest that prices could remain elevated in the second half of 2025," said the the CIO Equity at LIC Mutual Fund AMC.

Do you expect strong earnings and economic growth in H2FY26 compared to H1FY26? Could this lead to around 15 percent growth for the full year?

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Yogesh Patil

CIO Equity|LIC Mutual Fund AMC

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Projecting exact earnings growth for the fiscal year remains difficult amid prevailing global uncertainties. That said, with both the RBI and the Government actively pursuing economic stimulus through coordinated monetary and fiscal measures, we anticipate these efforts will begin to bear fruit with a lag of one to two quarters.

This leads us to believe that the second half of FY26 could witness a pickup in corporate earnings momentum.

We expect select pockets like industrials, consumer discretionary, select NBFCs to have slightly better visibility for earnings growth.

Do you rule out a significant recovery in the consumption space?

Looking ahead, we anticipate a gradual recovery in the consumption segment, supported by a confluence of positive factors—namely easing inflation, a robust agricultural output, personal income tax relief by the government, reducing EMIs from falling interest rates, and the RBI’s supportive stance on consumer credit.

While these elements are likely to bolster overall consumption, a broad-based recovery hinges on pace of job creation, incremental salary hikes, and progress of monsoon.

Selectivity will be key. We are favouring sub-segments characterized by low market penetration and a significant presence of unorganised players. This setup positions listed companies to capitalise on structural growth opportunities through market share gains, further supported by favourable sector-specific trends.

Do you believe valuations in banks and NBFCs have reached fair levels?

The valuation multiples for banks and NBFCs have certainly improved from their low levels. Last year, they fell below historical levels due to growth moderation, earnings moderation, and regulatory headwinds. Now, we believe they have reached near to their optimum level. And in the medium term, relative outperformance and multiple improvement will hinge on growth and earnings pick-up. Of the three key variables—credit growth, NIM trajectory, and asset quality—two should exhibit favourable and positive trends for the multiples to expand further from here on.

Do you think current geopolitical disruptions are not strong enough to alter the outlook on inflation?

India’s May headline CPI inflation declined to a six-year low of 2.8% YoY. This was driven by a decline in food inflation also to a six-year low. This remains well below RBI’s comfort band.

The ongoing conflict in the Middle East has raised concerns about potential disruptions in global crude oil supply. This could be due to reduced production from Iran or supply disruptions through the Strait of Hormuz, a crucial trade route for oil and gas. Iran produces approximately 3.3 million barrels per day (mb/d) and exports around 1.5 mb/d, with 90% going to China. OPEC, which produces roughly 28-29 mb/d, along with other key oil-producing nations (excluding Iran), is estimated to have a spare capacity of 2.9-6 mb/d.

At this juncture, any supply-led disruption in the crude market due to the conflict in the Middle East is likely to be temporary, as the demand-supply gap can be bridged by other nations. However, the geopolitical tension is an evolving situation. Any escalation of the conflict and involvement of larger nations could result in significant volatility in crude prices, leading to higher inflation.

Which sector—financials or technology—do you believe will lead the next rally in the benchmark indices?

The relative performance of any sector depends on both macro and micro factors governing that stock, as well as the valuation multiple position of the sector relative to historical levels. For financials, the valuation multiples have improved from their lows, driven by growth and earnings moderation. In the medium term, the relative outperformance will hinge on growth and earnings pick-up, with key variables such as credit growth and asset quality playing crucial roles.

On the other hand, the technology sector's growth hinges significantly on the economic outlook and trajectory in the US, where clarity should emerge as tariff discussions with other nations progress. The performance of the technology sector will be influenced by these macroeconomic factors and the sector's ability to innovate and adapt to changing market conditions. Given these considerations, technology may outperform financials primarily led by relative valuation multiple improvement.

Do you see any signs of the equity market topping out?

India represents a strong, structural growth story with a long runway. Investors should prioritize long-term wealth creation and not be overly concerned with short-term fluctuations. The Reserve Bank of India (RBI) and the government have implemented numerous fiscal and monetary measures to stimulate economic growth, which is expected to lead to a revival in corporate earnings. Additionally, with robust domestic and foreign liquidity, equity markets are anticipated to perform well over the medium to long term. Focusing on these fundamentals can help investors navigate short-term market volatility and achieve sustainable growth.

Predicting the outlook for a non-income-generating commodity like gold is inherently challenging. However, several factors suggest that gold prices could remain elevated in the second half of 2025.

Firstly, ongoing geopolitical conflicts continue to drive demand for safe-haven assets like gold. These conflicts create uncertainty in global markets, prompting investors to seek stability in gold. Secondly, elevated debt levels in the developed world contribute to economic instability, making gold a more attractive option for preserving wealth. Additionally, US President Donald Trump's decision to impose high tariffs on imports could exacerbate inflation pressures. Higher tariffs can lead to increased costs for goods and services, driving inflation and making gold a valuable hedge against rising prices.

Furthermore, continued global central bank purchases of gold to diversify forex reserves add to the demand for gold. Central banks are increasingly looking to gold as a means to protect their reserves from currency fluctuations and economic uncertainties. These factors collectively make gold an attractive investment option.

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.