The next leg of the market will be a "barbell" rally driven by both investment and consumption themes, said Shridatta Bhandwaldar, Head of Equities at Canara Robeco AMC.
"There are clear structural trends on both sides," he said while speaking at the Moneycontrol Mutual Fund Summit.
"If you look at the last decade, capital expenditure (capex) has been a key driver. The central and state governments, followed by a recovery in real estate, have together sustained capex momentum. These three components have been structurally positive," he added.
Bhandwaldar further highlighted that capex-linked segments have delivered strong growth—around 14–15% CAGR over the past five years, and about 10–11% over the last decade—outpacing nominal GDP growth.
This capex push has fuelled a robust investment-led rally, particularly since these sectors had underperformed for much of the previous decade due to high leverage and weak balance sheets, he said.
"With deleveraging and sectoral consolidation behind us, we’ve seen a broad-based earnings re-rating across public, private, and real estate-led capex. Private sector investments have also remained healthy through 2022 and 2023, making it a rare phase where all cylinders fired simultaneously," he added.
Looking ahead, Bhandwaldar doesn’t foresee a dramatic slowdown but rather a moderation. “The public capex cycle may plateau at 8–10% CAGR over the next 2–3 years, but select areas like defence, space tech, and transmission infrastructure—often driven by geopolitical tailwinds—still offer long-term potential. In renewables and power, investors must be selective along the value chain, but the opportunity remains intact," said Bhandwaldar.
He noted that while margin of safety in many investment-led themes has reduced, private capex still holds latent potential. “We are focused on segments where profit pools are expanding, even within a moderated capex cycle," he said.
On the consumption front, Bhandwaldar emphasized two key enablers: job creation and wage growth. “Here, the government's role is pivotal. Sustained policy support for employment-intensive sectors will be essential for driving the next wave of consumption," said Bhandwaldar.
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