Pratik Gupta, CEO and Co-Head of Kotak Institutional Equities, is calling time on the bearish narrative for Indian largecaps. The recent market correction has, in his view, repaired the damage to valuations, making blue-chip stocks genuinely attractive again. But he isn’t jumping for joy. The path to a sustained rally is blocked by two specific macro hurdles: crude oil prices stuck above $100 a barrel and stubbornly high global bond yields.
"We're not exactly out of the woods," Gupta told AirNews. He argues that global investors need a significant cooling of these macro headwinds to return in force. For now, foreign portfolio investors (FPIs) are still underweight on India. Why? Because even after the correction, Indian stocks aren't cheap enough compared to competing emerging markets, and the growth outlook isn't strong enough to justify the current price tags.
The debate around capital gains tax for FPIs is also a talking point, but Gupta is pragmatic. He likens tax reforms to "fixing the plumbing." You have to fix the leak before turning on the tap. A reduction in capital gains tax would improve competitiveness, sure, but it’s not a silver bullet. Investors also need lower oil, softer yields, and stronger earnings growth before they start reallocating capital into India.
So where should domestic money go? Gupta is selective. He favors private sector banks with strong deposit franchises, large NBFCs, and the telecom sector. His bullish case on telecom is structural: the heavy 5G capex cycle is mostly complete. This means companies can now focus on reducing debt and boosting free cash flow, leading to higher shareholder payouts. He also sees opportunities in hotels, domestic pharma, and specific auto segments like commercial vehicles and tractors.
There is a silver lining in the current FPI absence. "Positioning can't get any worse," Gupta noted. With foreign allocations already depressed, any improvement in the global macro environment could trigger a sharp sentiment reversal. For now, traders should watch the oil price and bond yields closely; until those cool off, the rally remains fragile.