Kenneth Andrade sees time correction stretching into 2026; backs metals, capex cycles, global-facing Indian firms

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Market participants should expect the period of time correction to extend into early 2026, with market breadth likely to stay weak through the first quarter, according to Kenneth Andrade, CIO of Old Bridge Mutual Fund. In an interview with CNBC TV18, Andrade said the headline indices may hold steady, but the broader market has continued to lose strength through 2025, which he characterised as a year of “reasonable consolidation.”

Despite the near-term caution, Andrade remained constructive on the medium-term prospects for corporate India, saying growth “should” return in 2026 and improve further into 2027. "The good news is that we've come out of 2023, 2024, and 2025 with single-digit headline numbers. I think we're looking a little promising as far as corporate India is concerned, and I think growth should head back in 2026," he said.

Andrade outlined two primary investment thematics for his fund: valuations and capex-led growth. He favours businesses that are either deploying capital expenditure (capex) or are at the end of their capex cycle. Sectors like pharmaceuticals and automotives fit this criterion. He also pointed to metals, which he expects will see significant volume growth in the next year to a year and a half as their capex cycle matures. Speaking on real estate, he identified consolidation as the main theme, noting that while prices have likely peaked, the market is now entering a volume-driven phase amid enormous supply.

Elaborating on his metals strategy, Andrade revealed a 12% allocation to commodities, including ferrous, aluminium, and zinc. The investment thesis is not solely dependent on commodity price upswings, which he sees as a near-term positive if it occurs. The core, long-term strategy is built on capex-driven volume growth as capacities come onstream. He noted that these businesses typically start with lower double-digit returns when new capex becomes operational, with efficiencies and inflation improving returns over time.

Conversely, Andrade maintains a cautious stance on new-age technology companies. While acknowledging that many have built strong franchises, he finds their valuations unattractive from his fund's perspective, which prioritises businesses with demonstrated cash flows and the ability to grow internally. "Either they have to grow dramatically, or the stocks have to correct. So, one of the two things will happen over the next couple of years," he said, adding that while he is positive on the franchises themselves, he has no investment view on most of them at current prices.

Regarding legacy IT services, Andrade confirmed a holding of around 10%, citing favourable valuations and strong cash flows. However, he cautioned that the benefits from emerging technologies like artificial intelligence will not be universal. "There'll be few that will take significant market share. I think you'll have to identify them in this cycle itself," he said.

Wrapping up his outlook, Andrade highlighted an overarching theme: a preference for businesses with significant dollar exposure, which are creating global franchises using domestic cash flows. He argued that for the market to grow meaningfully, Indian companies will need to tap newer geographies and markets, given the difficulty of relying solely on domestic demand. He added that with substantial capex already deployed on the ground, utilisation of these capacities will have to come increasingly from international markets.