Indian equities have hit an inflection point.
After absorbing two full years of valuation compression, domestic stocks are primed to outpace global peers as corporate balance sheets firm and multiples settle into rational territory, according to Sailesh Raj Bhan, Chief Investment Officer for Equity Investments at Nippon India Mutual Fund. The fund house—steering nearly $85.11 billion in assets—is hunting bargains in sectors discarded by momentum traders.
"Whatever has gone wrong has gone wrong in the last two years," Bhan said. "Now valuations are sensible, businesses are well priced, and earnings are improving." The broad market shakeout stripped speculative froth from core sectors, offering institutional capital prime entry points into established franchises without paying punitive premiums.
Information technology tops his contrarian slate. Street sentiment toward domestic software exporters has hit rock bottom—and that deep skepticism provides asymmetric upside. "The worst in IT services is priced," Bhan said. "Nobody expects more than 0% growth for them for the next two years. Even if a small turn in earnings or revenues happens, these are very sensibly priced businesses."
The calculus looks identical in private sector banking. Structural friction over balance sheet mergers and promoter shareholdings has cleared, leaving lenders unencumbered just as credit demand accelerates. Foreign institutional ownership remains muted—a setup that Bhan views as an immediate ignition switch for fresh institutional liquidity. Healthcare and private insurance companies also display attractive entry multiples following protracted regulatory probes that drove valuations down to historic medians.
Yet Bhan is drawing hard boundaries against market darlings. He warned that domestic momentum trades tethered to artificial intelligence hardware—specifically transformer manufacturers, wire makers, and cable suppliers—have pushed past operational reality. Valuations in those pockets have peaked. Even brisk quarterly revenue runs will fail to trigger further multiple expansion, leaving late-cycle buyers exposed to sharp re-ratings.
Beyond corporate balance sheets, macro external shocks look contained. India skipped the speculative foreign rush into software algorithms, insulating Mumbai trading floors from any sudden Wall Street tech liquidation. Crude oil floating between $80 and $90 a barrel remains digestible for corporate margins. Deficient rainfall patterns also pose less systemic danger than during prior agricultural shocks; modern irrigation and supply chain resilience have confined drought risks to local pockets rather than derailing broader GDP output.
Global portfolio managers are actively recalibrating country allocations. As liquidity departs overstretched developed bourses, Bhan expects capital allocators to target under-owned emerging markets with stable earnings visibility—positioning Indian blue chips at the front of the institutional queue.