Industrials, including defence, form the second key focus area, though selectivity is important given high valuations.
The third area of preference is consumer discretionary, covering automobiles—particularly four-wheelers—other discretionary consumption segments, and healthcare services such as diagnostics and hospital chains.Raychaudhuri noted that consumer staples are being avoided, as their single-digit growth outlook does not justify current valuations.
The firm has also fully exited IT services in the past three weeks, citing signs of pressure from artificial intelligence adoption and weak demand from Western markets, as highlighted by recent workforce reduction announcements from leading companies.Read Here | India is relatively immune to the tariff regime, says Manulife Investments
He emphasised that earnings estimates for India have been declining for nearly a year across most sectors, and this trend needs to reverse before investors, especially foreign ones, are likely to commit more capital.
On the pharmaceutical sector, Raychaudhuri expects the contract development and manufacturing organisation (CDMO) segment to remain a structural growth driver for years to come.
He pointed out that similar trends are visible in China, where foreign pharmaceutical companies are licensing drugs from local players. While India is estimated to be 7–10 years behind China in this area, the outsourcing model is expected to sustain in the Indian healthcare sector over the long term.
CDMOs are also considered less vulnerable to tariffs and trade disputes compared to generic drug manufacturers.
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