In an interaction with Kshitij Anand of ETMarkets, Ghosh highlighted that while FY26 has been marked by volatility due to geopolitical tensions and global uncertainties, India’s long-term structural story remains intact.
He added that a moderation in global themes such as the AI-led rally, along with improving earnings visibility and easing macro headwinds, could bring foreign investors back in a meaningful way, setting the stage for renewed bullish momentum in Indian equities. Edited Excerpts –
Q) FY26 returns have turned negative due to geopolitical concerns around West Asia. How do you sum up the financial year?
A) This has been a challenging year for the market. Just as synchronized fiscal and monetary policies were beginning to restore growth traction, geopolitical conflict disrupted the momentum.
While our forex reserves remain a core strength, we are navigating a capital account deficit; first since the Global Financial Crisis (GFC). This problem is now further exacerbated by the energy crisis and making the currency vulnerable.
However, it’s important not to lose sight of the bigger picture. If we look past the immediate noise, India’s track record is stellar.
We’ve seen 15%+ returns over the last 10 years, proving that while the short term is bumpy, the long-term Indian equity story is still one of the best in the world.
Q) As we head towards FY27, what are the key triggers investors should keep in mind that could lead to a market reversal or return of bullish sentiment?
A) I believe the backdrop will improve quickly once the geopolitical situation settles and we get clearer earning growth visibility. That said, the real ‘engine’ for a sustained rally will be the return of FIIs in a big way.
India is still one of the best long-term growth stories out there, but we lost the AI theme. Our market has recently been overshadowed by global AI hype.
Now that the AI and AI connected play is looking a bit overdone, a valuation correction there could be exactly what brings foreign investors back to our market.
Q) Which sectors should be on investors’ radar for FY27?
A) Our overarching theme remains centered on the domestic growth story. However, at this juncture, it is prudent to integrate a direct inflation proxy within the portfolio.
We simply cannot afford to ignore the sectors acting as the primary source for the high inflationary cycle that is expected to accelerate in the coming days.
Within the domestic framework, we maintain a strong preference for the banking and financial services sectors as our primary growth play.
Q) How should one approach gold and silver in the new financial year?
A) While gold is outside my primary area of expertise, its role as a hedge during periods of heightened uncertainty is undeniable.
However, current valuations are exceptionally stretched, which complicates tactical entry and suggests that traditional empirical prudence may not apply in the short term.
Looking further ahead, I believe a structural allocation to gold is justified as U.S. fiscal dominance faces headwinds and gold increasingly replaces U.S. Treasuries as the premier global risk hedge.
Q) Do you think there are certain sectors that have already corrected and are now available at attractive valuations?
A) While I believe the banking and real estate sectors have reached to a point where measured positions are warranted, the broader market remains expensive.
When we subject our investment universe to terminal growth rate modeling, we find very few opportunities priced under reasonable assumptions.
The fundamental wisdom of these models suggests that current valuations are pricing in a level of growth that is difficult to justify despite India remaining one of the best structural growth stories in the world.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
