After a relatively optimistic performance in the March series, bears took charge again over D-street sentiment this month, as Trump's tariff play brought little clarity to the overall picture. While the overall macros continue to signal a sharp revival, uncertainty owing to external factors is now the new dominant threat in the market. All eyes are now on India Inc.'s Q4 play which will tell where the investor sentiment is inclining.
In an interview with Outlook Business, Nikhil Rungta, CIO Equity at LIC Mutual Fund AMC, said that Nifty constituents are poised for high single-digit to low double-digit earnings growth, which might be enough to keep investor sentiment upbeat.
Private capex, a major piece of India’s growth puzzle, remains weak. Do you think this will make it harder for the economy to break out of cyclical slowdown, eventually weighing on the overall investor sentiment?
Private capex has been slow to pick up, largely due to global uncertainties and capacity utilization still normalizing in some sectors. However, this isn't a structural concern yet. Government capex has acted as a strong anchor, and with corporate balance sheets healthier and deleveraged, we expect private capex to accelerate in the second half of FY26.
Sectors like defence, renewables, railways, and semiconductors are already seeing green shoots. Markets may remain sensitive to capex data in the short term, but sentiment on D-Street is more influenced by earnings delivery, liquidity, and macro stability—which remain intact.
What's your outlook on India Inc.'s Q4 earnings season?
We expect Q4FY25 to be steady, if not spectacular. BFSI should continue to report healthy growth and stable margins. Autos and capital goods could surprise positively, driven by demand and operating leverage. IT might remain muted due to global softness, but deal wins could pick up. Input cost pressures have eased, so margins in consumer and manufacturing sectors may see an uptick. Overall, we anticipate high single-digit to low double-digit earnings growth for Nifty constituents—enough to sustain positive investor sentiment.
Which sectors look attractive in the coming quarters?
We continue to favour banking and financials, capital goods, and industrial manufacturing—sectors well-positioned to benefit from the ongoing capex cycle. We also like select names in auto, PSUs (especially in defence and railways), and are exploring opportunities in water and waste management infrastructure—a theme aligned with long-term sustainability. Stock selection remains key across all exposures.
Earlier this year, even the so-called safe 'consumption' sector faced the heat of market panic on D-Street. How do you see this trend playing out?
The sell-off in consumption was sentiment-driven, not entirely fundamental. Rural demand had slowed, input costs were volatile, and premiumisation trends were tapering. However, with food inflation easing, improving farm incomes, and improving rural spending, we expect a gradual revival. We remain selective—favouring companies with pricing power, diversified portfolios, and cost efficiency.
US value stocks vs. China’s growth play, given the cheap valuations where are FIIs placing their bets?
It’s a barbell approach. FIIs are cautiously optimistic on US value stocks with predictable cash flows, while also scouting selective opportunities in China due to beaten-down valuations. But India stands out for its macro stability, reform momentum, and strong domestic demand. The recent FII inflows into Indian equities reflect this growing conviction—especially as they rebalance from riskier EMs.
Have the markets hit the bottom or is there more pain ahead?
The recent correction seems more like a healthy consolidation than a sign of deeper pain. Markets have rebounded smartly in March, with Nifty gaining over 6%. While short-term volatility may persist due to state elections and global events, we do not expect a major downside unless there's an external shock. We believe the bottoming-out process is largely behind us, and this is a phase to accumulate quality with a long-term lens.
