“It’s a continuation of a tough year… So, if you look at our year-end views, we think that from where we are in the markets currently, Nifty can possibly give you 10% rupee returns from now. This is our base case.”
Rupee weakness could keep dolalr returns for foreign investor under pressure, making India likely to lag other emerging markets this year.
Against this backdrop, broad-based market gains may remain limited, with stock-specific opportunities expected to drive returns instead.
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BofA remains selective, highlighting around 15–16 high-conviction stocks within sectors tied to its preferred long-term themes.
Shah said the focus for investors should shift towards what he described as “new frontiers of growth” — sectors that could shape India’s next phase of expansion as traditional growth drivers lose momentum.
The theme this year revolves around emerging sectors such as energy security, artificial intelligence (AI), data centres and shipbuilding. According to Shah, these areas could play a bigger role in driving economic growth over the next decade.
One of the sectors BofA is closely tracking is shipbuilding, which it sees as a long-term opportunity backed by favourable global shifts and policy support.
With China, Korea and Japan dominating global shipbuilding despite ageing workforces, India could benefit from its labour advantage and growing government support through incentives, subsidies and financing measures.
BofA believes the sector has the potential to evolve into a major manufacturing theme over time, much like the EMS space did in India several years ago.
Within energy security, BofA sees multiple areas emerging as growth drivers, including coal gasification, biofuels, electrification and deep-water exploration. Each of these segments also has several layers of opportunity.
For instance, electrification could see investments spread across nuclear power, coal, battery storage and other supporting technologies, making the overall theme broad and interconnected.
BofA expects the RBI to raise interest rates by a cumulative 50 basis points in FY27, including one hike later this year and another in March next year.
He noted that tighter monetary policy, if implemented, could impact economic growth and weigh on earnings growth for Nifty and broader market companies.
For full interview, watch accompanying video
