Amnish Aggarwal, Director of Institutional Research at PL Capital, expects further pressure on Indian equities as rising crude oil prices, global bond yields and inflation create risks for economic growth. He does not expect a V-shaped recovery and said markets could decline further before stabilising.
He said the impact of rising prices on consumer demand will be important to watch after Diwali. If inflation and global uncertainty persist beyond the festival season, consumption growth could slow further, particularly in discretionary segments such as automobiles.
Global headwinds could keep markets under pressure
Aggarwal said the recent market decline did not come as a surprise, given the combination of domestic and global risks. He cited deficient monsoon conditions, higher US bond yields, crude oil prices above $100 per barrel and growing uncertainty in West Asia.
He also pointed to the narrowing gap between Indian and US bond yields, which could affect foreign investors’ returns and influence capital flows. According to Aggarwal, global investors are factoring in the possibility of further economic pressure as geopolitical tensions spread beyond the immediate conflict zone.
He said, “I don’t rule out some more fall in the market before it stays there, consolidates, and then gets ready for the next move.”
Aggarwal added that domestic demand and economic growth were holding up at present, but rising prices of essential commodities could affect how long consumption remains resilient.
He said investors should watch developments after Diwali to assess whether inflation and external pressures begin to affect spending and growth. He also cautioned against expecting a quick market recovery.
AI and GCC expansion weigh on IT services outlook
Aggarwal also remains cautious on IT services stocks, with artificial intelligence (AI) changing the industry and global companies increasingly setting up global capability centers (GCCs) in India.
Global companies are establishing their own centers in India to manage technology and other business functions. This shift could change the demand for services provided by listed IT firms and affect their growth.
Aggarwal said the industry was going through a transition and that the next 12–18 months would be important in determining how companies respond.
He said, “So as of now, I think there is no change in the view, and I remain quite cautious on the sector.”
The pace of AI adoption, the ability of IT companies to adapt their business models and the resulting growth rates will be key factors for investors to monitor.
Hospital stocks face risks from potential regulation
Aggarwal also flagged the possibility of further regulation in the hospital sector. He said hospital profitability depends not only on cancer drugs but also on consumables and other medicines, where margins can be significant.
He cautioned that future regulatory measures could extend beyond cancer drugs to other products and consumables, affecting hospital companies’ profitability.
While some hospital companies have delivered annual earnings growth of around 15–20%, Aggarwal said the valuation re-rating seen over the past two years may not continue. He also questioned whether valuations of around 25–30 times two-year forward earnings before interest, taxes, depreciation and amortisation (EBITDA) could be sustained over the medium term.
Investors will need to track potential regulatory changes alongside earnings growth and valuations when assessing hospital stocks.
For the full interview, watch the accompanying video
PL Capital’s Amnish Aggarwal stays cautious on IT stocks, flags GCC shift and AI risks
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