This $196 million fund CIO expects PSU banks, OMCs to drive next rally

Public sector stocks are making a comeback, says Pankaj Murarka, CEO and CIO of Renaissance Investment Managers, which manages assets worth over $196 million. He believes the next leg of the rally could be led by PSU banks and oil marketing companies (OMCs) as reforms and improving fundamentals revive investor interest.“The trigger point for PSU rallies is always the government’s reform actions,” Murarka said, pointing to recent clarity on LPG subsidy sharing and benign oil prices that have boosted OMC cash flows.

He added that renewed foreign inflows — over $10 billion into the financial sector in the past eight weeks — and talk of potential bank consolidation are also driving optimism in state-owned lenders.

Murarka said valuations across the PSU space still look attractive despite their strong run between 2022 and early 2024. “Most of these companies were trading at single-digit multiples then, so the rally started from a very low base,” he said.Beyond PSUs, Murarka’s portfolio continues to favour private sector banks and internet companies, both of which have performed well. He expects IT and consumer stocks, which lagged this year, to see a rebound in 2026.

In the consumer space, festive demand has surprised positively. “Maruti has seen 100% year-on-year growth in festive bookings, and several models have six-to-eight-week waiting periods — something we haven’t seen since 2021,” he said. Murarka expects this pickup in consumption to sustain, supported by strong household finances and pent-up demand.
He also sees early signs of a turnaround in the IT sector. Despite weak performance this year, earnings seem to have bottomed out. “Valuations are attractive with stocks down 17–18% this year, and global IT spends are likely to recover next year,” he said.Read Here | Edelweiss AMC’s Trideep Bhattacharya urges caution on IPO valuations, sees tech recovery ahead

Looking at the broader market, Murarka noted that the September-quarter earnings season has been better than expected, marking the first time in over a year without any major downgrades. “After five quarters, we are seeing no incremental earnings downgrades and even some upgrades,” he said.

He expects earnings growth to accelerate in the second half of the fiscal year, which could strengthen the overall market sentiment. “We are near the trough of earnings deceleration. Outlook for earnings now looks good, and that makes me optimistic about markets,” Murarka said.

As for asset allocation, Murarka advises 100% equities. “For me, there’s only one asset class that exists in the world, and that’s equities,” he added.

For the entire discussion, watch the accompanying video

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