The market just took a hit, and for Sanjeev Prasad, Managing Director and Co-Head of Kotak Institutional Equities, that pain is actually an opportunity. He’s calling the recent correction in largecap valuations a gift, pointing to private banks, insurance firms, and NBFCs that have been left behind for years. But he’s not just talking about the banking book. Prasad specifically flagged Oil and Natural Gas Corporation (ONGC) as looking inexpensive, even with crude prices hovering higher than expected. And Bharti Airtel? He’s still bullish, citing forward earnings multiples that have pulled back to more sensible levels.
It’s not just financials. Consumer staples took a beat too. Dabur, Godrej Consumer Products, and Hindustan Unilever (HUL) all saw their earnings multiples shrink significantly. Prasad sees room for recovery here, noting that demand is picking up. But he’s drawing a hard line at midcaps. "Many have rallied sharply over the past six months," he noted, warning that some of that upside is driven by market chatter rather than actual business fundamentals. The risk/reward ratio there, in his view, is getting thin.
Then there’s the IT services debate. Prasad is bluntly rejecting the idea that a slowdown in AI spending is a silver bullet for Indian IT firms. "Just because there is so-called or purported slowdown in AI spending, does it mean that suddenly the environment for the Indian IT services companies gets better? I don't know," he said. His take is that global tech budgets are still tight due to slowing economic growth. Slower revenue growth means more competition among vendors, which usually leads to one thing: margin compression. He suspects industry margins are going to slip in this more competitive environment.
Looking at the September quarter earnings season, Prasad expects results to broadly mirror the April-June 2026 quarter. The base effect is favorable. Automobiles should shine, backed by strong July and August sales volumes. Consumer staples are set to benefit from improving demand, and commodity companies will report healthy numbers because prices remain elevated compared to year-ago levels. Unless there’s a sharp global slowdown or a crude oil surge that forces aggressive monetary tightening, consensus earnings growth estimates look safe.
So, where should you park your money? Prasad advises sticking with large caps over expensive thematic stocks. While long-term themes like precision engineering and domestic manufacturing are real, valuations have stretched. He specifically warned about the wires and cables industry, noting that new capacity coming online could lead to overcapacity and margin pressure. The strategy is simple: be selective. Don’t pay a premium for the whole company just because one small segment is growing fast. Focus on businesses where the valuation actually reflects the growth.