Prasad expects Nifty 50 profits to grow by 17% in FY27, up from under 10% in fiscal year FY26. “We are definitely coming to the end of the earnings downgrade cycle,” he said, noting that autos, banks, and IT were the main sectors that saw earnings cuts in the past year.
Also Read | These are the top bets from a $15 billion fund managerHe expects auto companies to improve due to goods and services tax (GST) rate cuts and potential demand support if the Eighth Pay Commission is implemented. Banks could see a turnaround as “weak loan growth, decline in net interest margins (NIMs) and higher credit costs” ease. The IT sector, he said, had a “challenging year,” but conditions could improve next year.
Valuations, however, remain a concern. “Prices have come down, but on the back of earnings coming down,” he said.
He pointed out that consumer staples and discretionary stocks remain expensive, with limited earnings growth. “It’s very hard to argue for 45-60 P/E when most companies are delivering mid-single-digit earnings growth,” he said.
Manufacturing is a key growth opportunity over the next decade, given the government incentives, import substitution, and push for electrification. He added that sectors such as electronics, capital goods, storage, and batteries could see strong growth, although valuations for some names like Dixon Technologies remain elevated.
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On the initial public offering (IPO) activity, Prasad said foreign investors have sold about $23 billion in the secondary market and $5 billion in the primary market over the past year. However, some IPOs are attracting buyers because “the stories are good and they are coming at the right price.” He noted that issues priced at reasonable valuations – such as LG Electronics and Havells – have performed well post-listing.
Discussing foreign investor flows, Prasad said India’s high valuations have limited FII interest compared to cheaper markets like China and South Korea. “Valuation is still high, and at this point, there are enough opportunities elsewhere,” he said.
Prasad believes both safe-haven and risky assets are rising simultaneously. “It just tells me there’s complete fear of missing out (FOMO) in the world,” he said. “Whatever is going up, irrespective of any logic, people are running after that.” He attributed the recent rise in gold mainly to investment flows rather than central bank or jewellery demand.
For the full interview, watch the accompanying video
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