Indian equity markets could find support from easing global uncertainties, strong corporate earnings and improving investor sentiment, according to Rahul Arora, CEO of Ashika Institutional Equities.
Arora said the outcome of the upcoming US midterm elections could shape geopolitical developments and influence crude oil prices, bond yields and capital flows, creating a more favourable backdrop for emerging markets, including India.
Arora expects private sector banks to continue delivering healthy earnings growth over the next two years and believes market valuations remain reasonable despite recent volatility.
While he sees further room for gains in select sectors, he said the recent rally in IT stocks is primarily a tactical opportunity rather than the beginning of a long-term structural re-rating.
“I’d say from being a little overly cautious, we’re now cautiously optimistic,” Arora said, adding that the US elections could become the biggest trigger for markets over the coming weeks. He said that if geopolitical tensions ease, crude oil prices move closer to $70 per barrel and bond yields soften, things start to look very different for the global economy.
Arora also pointed to the recent correction in US AI-related stocks as a positive development for Indian markets. He noted that foreign institutional investors had earlier shifted capital away from Indian equities into AI-focused investments overseas, but the recent unwinding of that trade could improve flows into India. He also expects the pace of domestic IPOs to moderate, helping preserve liquidity.
Arora said quarterly earnings across major private banks have largely exceeded expectations. He highlighted ICICI Bank as the sector leader because of its superior return ratios but believes several private banks continue to offer attractive valuations. “We would expect most of the frontline private sector and midcap private sector banks to grow by between 15% to 20%,” he said, adding that the firm also sees value in State Bank of India.
Discussing the IT sector, Arora said the rally was driven by under-owned positions, attractive valuations and better-than-expected quarterly earnings. However, he cautioned that the sector’s long-term earnings outlook remains modest. “This could be more a trade than an investment turnaround,” he said, noting that sales and profit growth for the industry are still expected to remain in the high single digits over the next two years.
Arora also shared a selective view on consumer stocks. He prefers packaged food companies such as Britannia Industries, Nestlé India and Tata Consumer Products, while expecting rural demand to improve over the next few years as government spending linked to state elections supports consumption. However, he believes sustained double-digit revenue growth remains the key challenge for the broader consumer staples sector.
Among stock ideas, Arora highlighted several less-tracked opportunities. He remains positive on Tilaknagar Industries in the alcoholic beverages segment, Gravita India, Pondy Oxides & Chemicals and Jain Resource Recycling in metal recycling, and electrical equipment makers including Polycab India, RR Kabel, Orient Electric and Crompton Greaves Consumer Electricals. According to him, the metal recycling companies could deliver 30-40% compound annual revenue growth over the next two years as recently added capacities begin contributing to earnings.
For the full interview, watch the accompanying video
US midterm elections, strong earnings could lift Indian markets: Ashika Institutional Equities CEO
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