Indian market looks healthier, says $38 billion fund manager, as earnings cuts ease

India’s market outlook is improving as earnings downgrades slow and valuations turn more reasonable, said Karthik Kumar, Portfolio Manager for Emerging Markets at Axis Mutual Fund, which manages around $38 billion in assets.“We’ve underperformed emerging markets by almost 20% over the last one year, as a result of which our valuations compared to emerging markets have gone down. They were trading at a premium of almost 90–95%, that has come down to average levels of 45–50%,” he explained.

Earnings downgrades are also less sharp now, with cuts easing to about 1–1.5% this quarter compared with 3–3.5% in the previous one. Kumar’s full-year growth expectations remain around 10–11%, broadly in line with long-term trends.

“Expectations have kind of moderated, valuations have moderated, and the government has done a fair bit, be it in terms of central bank action or policy action. So from a market setup perspective, it looks positive in the medium to longer run,” he said.Among sectoral bets, Kumar remains overweight on tourism-related consumer themes such as hotels and airlines, as well as capital goods, particularly transmission and distribution. He also sees opportunities in public sector undertaking (PSU) banks, telecom, and defence stocks.

Also Read | GST cuts and tax relief may offset more than half of Trump’s tariff impact: Pankaj MurarkaConsumer staples, however, still remain under watch. “We need a few more positive data points to increase exposure there.” He is more inclined toward discretionary themes such as value fashion and tourism, which may benefit from GST changes. He remains bullish on cement.

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Axis MF also has exposure to private banks, non-banking financial companies (NBFCs), and defence stocks, while tech is approached selectively through bottom-up stock picking.

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