India at turning point for market outperformance, says Nippon MF’s Sailesh Raj Bhan

Indian equities could be approaching a turning point after two years of valuation pressure, with improving earnings and more reasonable stock prices creating opportunities across several sectors, according to Sailesh Raj Bhan, CIO – Equity Investments at Nippon India Mutual Fund, which manages assets worth nearly $85.11 billion. “This clearly is the turning point for India’s outperformance,” Bhan said.

“I think whatever has gone wrong has gone wrong in the last two years. I think now valuations are sensible, business are well priced,” he said, adding, “Things are turning, and you know earnings are improving, and you get great companies at sensible prices today.”.

He believes that even if global markets face a correction led by concerns around artificial intelligence (AI) investments, the impact on India could be relatively limited. India has not been a major participant in the global AI-led market rally, which could also reduce the downside risk from any correction in that trade.

The fund manager also sees limited risk to Indian markets from a possible global correction. He said concerns around crude oil prices and the weak monsoon have already been partly factored into stock prices. If crude prices ease and remain in the $80–90 per barrel range, some of the pressure on the economy could reduce.

On the monsoon front, he believes India is better placed than it was a decade ago, with the impact of a deficient monsoon likely to remain localised rather than affect the broader market.

Bhan believes the recent underperformance of several large companies has brought valuations to attractive levels, particularly in banking, IT services and consumer-facing businesses. He also expects India to benefit as global investors reassess their allocations and look towards markets that have remained relatively under-owned.

IT services companies are among the sectors Bhan believes could offer value.

He said,  “The worst in IT services is priced. Nobody expects more than 0% growth for them for the next two years, and the expectations are low. Even if small turn in earnings happen or revenues happen for them, which is definitely a good possible case, I think these are very sensibly priced businesses.”

However, he is cautious about Indian companies linked to the AI infrastructure theme, including transformers, wires and cables. According to him, valuations in these pockets have already peaked, leaving limited scope for further re-rating even if earnings continue to grow.

Bhan also sees opportunities in large private sector banks. He believes concerns around ownership, mergers and other bank-specific issues have largely played out. With growth returning and foreign investor ownership remaining relatively low, these lenders could attract fresh interest.

He also highlighted large consumer companies, healthcare stocks and private sector insurance companies as areas worth watching. Both healthcare and insurance stocks have corrected amid regulatory concerns, bringing valuations to more reasonable levels.

On insurance, he believes regulatory changes, if implemented with some modifications, could support profitability for companies in the sector.

For the entire discussion, watch the accompanying video

Nippon India MF’s Sailesh Raj Bhan sees turning point for Indian markets; favours large banks, IT st

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