Lower oil prices, supportive measures from the Reserve Bank of India (RBI) and current market valuations have improved the outlook for both the economy and equities.
Jain expects domestic non-systematic investment plan (SIP) flows to recover as investor sentiment improves. Foreign selling should be viewed alongside primary market fund raising, including initial public offerings (IPOs) and stake sales by private equity investors and multinational companies. According to him, steady domestic secondary market flows can absorb foreign selling when primary market activity remains subdued.
He favour large-cap stocks over the broader market. While corrections have created opportunities in parts of the small and mid-cap universe, investors need to be selective.
“There is value emerging in one out of 10, one out of 20 companies,” Jain said, referring to the small and mid-cap segment.
Among sectors, banks remain his preferred investment theme. Jain said valuations in the banking sector appear more attractive than in many other parts of the market.
He believes the distinction between private and public sector banks has become less relevant, with the more important divide now being between large banks and smaller lenders. While his long-term preference remains large banks, he expects improved liquidity conditions to support small and mid-sized banks as well.
Jain said his portfolios remain fully invested and continue to have a predominantly large-cap orientation. As a long-term investor, he indicated there has been little portfolio churn in recent months.
Beyond banks, Jain highlighted pharmaceutical innovation as an emerging theme in India. He pointed to progress in drug discovery and novel therapies, saying several companies are beginning to make meaningful advances.
He said that the area remains uncertain but could create significant opportunities over time.
Jain also sees potential benefits for automobiles, financing companies and sectors linked to lower oil prices. Oil marketing companies (OMCs) could gain from the recent decline in crude prices, though he remains cautious about their long-term growth prospects due to the cyclical and capital-intensive nature of the business.
Jain said growth prospects remain intact on defence stocks but believes much of that potential is already reflected in valuations, adding that markets have already discounted a substantial part of future growth expectations.
For the full interview, watch the accompanying video
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