MC Interview | Strategy-first Budget builds domestic base; US trade deal lifts India in global supply chains: Sonam Srivastava

Sonam Srivastava is the Founder and Fund Manager at Wright Research PMS

• India–US deal reinforces India’s credibility as reliable manufacturing and export partner
• A sudden surge in FII inflows purely because deal is signed is unlikely
• Good time to be selective and disciplined, not aggressively indiscriminate

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The Budget reduced policy uncertainty by staying focused on capex, manufacturing incentives, and fiscal discipline instead of short-term populism, while the India–US trade deal complements this approach by improving external visibility, especially for export-oriented and manufacturing-linked sectors, said Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, in an interview with Moneycontrol.

She added that a strategy-first Budget sets a strong domestic foundation, while the trade deal enhances India’s positioning in global supply chains.

According to her, a sudden surge in FII inflows purely due to the signing of the deal is unlikely. Foreign investors typically base their decisions on a combination of relative growth prospects, earnings momentum, currency stability, and global risk appetite.

Is this the best time for Indian equities, given that the deal has come at the right time after a Budget that prioritised strategy over populism?

It is better described as a more investable phase rather than the “best time.” The Budget reduced policy uncertainty by staying focused on capex, manufacturing incentives, and fiscal discipline instead of short-term populism. That matters because markets respond more to predictability than generosity. The India–US trade deal complements this by improving external visibility, especially for export-oriented and manufacturing-linked sectors. The sequencing is important.

A strategy-first Budget sets the domestic foundation, while the trade deal improves India’s positioning in global supply chains.

That said, valuations across Indian equities are mixed. Large parts of the market are already pricing in strong medium-term growth, while earnings recovery is still uneven. This makes it a stock-picker’s market rather than a broad market entry point.

The setup is constructive for investors with a medium-to-long-term horizon, but short-term returns will still be shaped by earnings delivery, global liquidity, and US rate expectations. In that sense, this is a good time to be selective and disciplined, not aggressively indiscriminate.

Do you expect FIIs to return with strong conviction now that the India–US trade deal has been concluded?

A sudden surge in FII inflows purely because the deal is signed is unlikely. Foreign investors typically move on a combination of relative growth prospects, earnings momentum, currency stability, and global risk appetite. The trade deal helps on the margin by lowering India’s perceived policy and geopolitical risk and strengthening strategic alignment with the US. That improves India’s standing in global asset allocation discussions.

However, strong and sustained FII conviction will depend on follow-through. Earnings delivery over the next few quarters, especially outside a narrow set of large caps, will be critical. FIIs will also compare India against other emerging markets on valuation comfort and growth durability. If global liquidity conditions remain supportive and India shows improving earnings breadth, flows can turn more consistent rather than episodic. The deal should be seen as a structural positive that opens the door for capital, not a single trigger that guarantees immediate inflows.

Which key sectors are likely to be at the forefront in attracting FII inflows now?

Sectors aligned with manufacturing, exports, and domestic capex are best positioned. Industrials, capital goods, and infrastructure-linked companies stand out, especially those with strong order books and execution visibility. Electronics manufacturing, specialty chemicals, and auto ancillaries also look attractive, given their role in global supply chains and the China-plus-one diversification theme. These sectors benefit directly from trade integration and longer-term investment cycles rather than short-term demand swings.

Financials remain an important anchor for FII portfolios. If credit growth stays healthy and asset quality remains stable, banks and select NBFCs could continue to attract steady flows. Technology and pharmaceuticals may see selective interest rather than a broad-based rerating, focused on companies with margin stability and diversified global demand. Overall, FIIs are likely to favour sectors where earnings visibility is improving and balance sheets are strong, rather than chasing momentum-driven themes.

Is this a major positive for India, which has been working steadily to become a manufacturing and export hub?

Yes, this is a meaningful strategic positive, even if the immediate economic impact appears modest. Trade deals matter less for near-term tariff arithmetic and more for signaling, supply chain decisions, and long-term capital allocation. The India–US deal reinforces India’s credibility as a reliable manufacturing and export partner at a time when global companies are actively diversifying supply chains.

India has already laid groundwork through production-linked incentives, infrastructure spending, and incremental ease-of-doing-business reforms. This deal strengthens that narrative and can accelerate decisions on capacity expansion, technology transfer, and vendor development. The real payoff will come over multiple years as investments compound and export ecosystems deepen. Execution remains the key risk. States, logistics, and labour flexibility will determine how much of this opportunity is converted into actual output and jobs.

Do you expect Indian corporate earnings to return to a strong growth phase? Are you revising your earnings expectations for FY27?

A gradual earnings recovery appears more realistic than a sharp rebound. FY26 should see improving earnings breadth, with growth spreading beyond a small set of large companies into industrials, manufacturing, and domestic cyclicals. Margin pressures are easing in parts of the market, but demand recovery is still uneven, especially in export-facing segments.

For FY27, expectations could move higher if global growth stabilises and India’s investment cycle sustains momentum. However, any revisions at this stage should be measured rather than aggressive. The bigger shift is likely to be in earnings quality rather than headline growth rates. Balance sheet strength, cash flow generation, and return on capital will matter more than topline acceleration alone. Investors should expect higher dispersion in earnings outcomes, creating room for stock-level alpha rather than broad index-led gains.