Gupta expects foreign investor sentiment to improve over the next two to four quarters if companies continue to deliver stable margins and earnings. He believes export-focused businesses such as capital goods, auto ancillaries, textiles and chemicals are well placed to benefit as India becomes more competitive globally.
Gupta said India has faced two major global headwinds over the past two years—tariffs and higher crude prices—but domestic fundamentals have strengthened.
“Domestic macros have improved meaningfully,” he said, pointing to the World Bank’s upgraded growth outlook for India.
He said persistent foreign institutional investor (FII) selling has been driven partly by capital shifting towards artificial intelligence-related investments globally and by the rupee’s depreciation against the US dollar and other emerging market currencies.
“I think this headwind of currency… should become a tailwind, and we do think India is becoming more competitive as far as exports are concerned,” Gupta said.
He added that his preferred sectors include manufacturing, capital goods, auto ancillaries, textiles and chemicals, where India’s improving export competitiveness could support growth.
On monetary policy, Gupta expected the Reserve Bank of India (RBI) to begin a rate hike cycle, but he also believes it is likely to be limited.
“We do think that we are on the verge of a rate increase cycle. Logically, it should be shallow,” he said, while noting that inflation remains below the RBI’s 6% threshold.
Discussing FII flows, Gupta said weaker corporate earnings had weighed on foreign investor sentiment, but recent quarterly results indicate conditions are improving.
“If companies are able to demonstrate stability in their operating margins, we would witness meaningful improvement in the FII flows over the next two to four quarters,” he said.
Gupta also said the surge in IPO activity has created more competition for investor capital, with institutional investors increasingly favouring companies that continue to strengthen their market position.
On the insurance sector, he said recent regulatory proposals remain in the draft stage, and markets may have reacted prematurely.
“It’s still early days,” Gupta said, adding that the final regulations could differ significantly from the draft proposals.
While he remains positive on hospitals because of favourable demand and limited supply, Gupta said JM Financial AMC is currently staying on the sidelines in insurance until growth improves.
For the full interview, watch the accompanying video
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