He expects these sectors to deliver steady returns over the next few years, while remaining cautious on metals and the long-term outlook for IT services.
Agarwal said his view on FMCG has remained unchanged despite a weak start to the monsoon and increasing competition from direct-to-consumer brands. He expects inflation-led pricing to support revenue growth, while government measures could help sustain consumer demand.
He noted that the sector has underperformed for the past three to four years and could benefit as revenue growth improves. While acknowledging competitive pressures, he said the market remains large enough for established companies to grow.
Agarwal added that investors should adopt a stock-specific approach rather than buying the entire sector.
Apart from FMCG
, Agarwal said his conviction has increased in private sector banks. He believes concerns over higher interest rates, crude oil prices and sustained rupee weakness have eased, creating a better operating environment.
According to him, stronger-than-expected credit growth, stable margins and attractive valuations after years of underperformance support the investment case. He expects large private banks to generate mid-teen compounded returns over the next three years.
Agarwal advised caution, especially on aluminium producers, arguing that lower energy prices could weigh on aluminium prices. He said investors should avoid making long-term bets based on commodity price forecasts.
“I personally find it impossible to predict metal and material prices, and I tend not to take calls on them,” he said.
Agarwal remains positive on pharmaceutical companies investing in innovation and generic medicines. He said Indian drugmakers are likely to focus on new drug development, delivery systems and expanding generic portfolios, while branded generics could face pressure over time.
He also acknowledged that valuations in large-cap IT companies appear attractive but said uncertainty around artificial intelligence (AI) has prevented him from taking exposure. Agarwal said AI could significantly alter the industry’s long-term earnings potential, making it difficult to assess the sector’s terminal value with confidence.
For the full interview, watch the accompanying video
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