Speaking to ETMarkets’ Kshitij Anand, Sood said he believes the next step in wealth creation will be led by financial and domestic manufacturing themes, supported by strong balance sheets, government-led capital investment and structural reforms under the Make in India and PLI initiatives.
He remains overweight banks, consumer discretionary and capital goods, while taking a cautious stance on IT and telecoms amid subdued growth prospects.
Sood also highlights gold’s record rally, attributing it to central bank diversification and global policy shifts, and identifies long-term opportunities in the financialization of savings, high-speed trading and automation-driven efficiency gains. Edited excerpts –
Q) Which sectors are you overweight or underweight?
A) Sectors considered
A) CRDMO (Contract Research, Development & Manufacturing): Taking advantage of global supply chain diversification outside of China and continued price pressure in the US/Europe. Indian players have a strong regulatory track record, are improving scale and have superior ROIC profiles.
Consumer Discretionary: Supported by rural recovery, holiday demand and premiumization trends. The expected 8th Pay Commission and rising disposable incomes will provide a consumption boost in the medium term.
Banks and Financial Institutions: Large private banks remain well capitalized, with healthy credit growth, improving asset quality and a strong deposit franchise. NBFCs are also benefiting from the demand for retail credits.
Capital Goods and Infrastructure: Benefiting from government-led investment momentum, PLI schemes and revival of private capital investment. Order books are at their highest point in several years.
Underweight sectors
IT Services: Growth prospects remain subdued due to global macro uncertainty, weak US/EU discretionary technology spending and pricing pressures.
Telecom: ARPU growth has stabilized, competition remains fierce and investment intensity (rollout of 5G) continues to weigh on free cash flows.
Q) The precious metal continued to shine as gold reached new all-time highs. What is driving the rally and what is the outlook?
A) Central banks are diversifying their reserves more aggressively, with global gold supplies now outpacing U.S. government bonds for the first time in nearly three decades.
This shift is driven by concerns about inflation, currency volatility and the need for portfolio security. The Federal Reserve’s recent rate cut and expectations of further policy easing have lowered real interest rates, increasing the appeal of non-yielding assets such as gold.
A weaker US dollar, robust central bank purchases and geopolitical tensions have further supported the rally.
Q) Where are the opportunities in this market if someone has a time horizon of, say, 3-5 years?
There are some structural themes that remain intact. The financialization of savings, fueled by digital advances and government incentives, is diverting household wealth into productive investments.
The financial sector is mainly selecting mid-sized banks and NBFCs with strong asset quality and growing credit demand. Also, domestic consumption-driven sectors such as certain segments of FMCG and retail may benefit as inflation declines and rural demand picks up.
The rapid expansion of high-speed commerce, enabled by the growth of mobile internet and e-commerce, is revolutionizing the retail industry, with the market expected to reach a value of $5.5 billion by 2025.
Meanwhile, the ‘Make in India’ initiative, supported by policy reforms such as the PLI program and the China+1 strategy, is strengthening India’s position as a global manufacturing hub.
Furthermore, automation improves efficiency across all sectors, driving innovation and economic expansion. These fast-growing sectors offer attractive opportunities for capital deployment.
(Disclaimer: Recommendations, suggestions, views and expert opinions are their own. These do not represent the views of the Economic Times)
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